#### The People *ex rel.*The President, etc., of the D. & H. C. Co., Resp’t, *v.*John Ganley *et al.,*App’lts.

*(Supreme Court, General Term, Third Department,*

*Filed February 4, 1890.)*

1. Taxes—Assessment.

On return to a writ of *certiorari,*the assessors stated that they assessed all the real estate at one-fifth of its value, and that relator’s real estate was assessed at that rate. *Held,*that in view of the admitted violation of duty by the assessors, and the falsity of their oath, no confidence could be put in their latter assertion.

2. Same—Bailboads.

The earning capacity of a railroad is not a fair mode of determining the value of its real estate; an opinion as to its value should also include its original cost, cost of present reproduction and many other considerations.

Appeal from order upon *certiorari*reducing an assessment on relator’s real estate.

The following is the opinion at special term:

Fish, J.—The assessment of the real estate of railway companies for the purpose of taxation by the local authorities is fraught with difficulties. There does not seem to be any well defined criterion of values, to aid the assessors or the courts! So much of judicial authority as has been obtained instructs us to hold, that in fixing the value of a parcel of the real estate in a particular locality we must base the assessment upon the aggregate value of the whole line of railway, including depots, terminal convenience, storehouses, repair shops and other structures necessary for the convenient operation of the road. Beyond that, the adjudicated cases give very little instruction and leave the subject open and unsettled.

The relator has, in the department which covers the village of Fort Edward, 192 miles of railway track connected with the usual additions for the convenient operation of the road.

It makes its way through or into several counties, and through a long line of towns and villages, the whole system connected, and each mile of track, and each structure used in aid of and in common with the whole. One part of it cannot be separated from the residue, and be of practical value or furnish a basis of a just assessment. ■ If the aggregate value of the whole real estate can be determined, such value may be apportioned, and a reasonable approximation of the value for the portion in any particular locality thus allowed. The law, however, has furnished no means nor direction for making any such appraisal, and there is no official, or any body of men, invested with authority to meet the exigency; so that the assessors of each town, city or village, are obliged to work out the problem, as best they may, under the present unsatisfactory condition of the laws.

It follows that there is no uniformity in the fixing of values and the rate of assessment in the several localities will be higher *131or lower as the leanings and predilections and uninstructed judgment of each body of local assessors prevail.

A local assessment under such circumstances, without a careful inquiry into the business of the corporation, and a careful estimate upon good evidence of the price it would cost to purchase such right of way as the relator has, with its appurtenances and the necessary cost of constructing such a road, would be and is mere arbitrary work.

If it could be shown, with reasonable certainty, what sum it would cost at the present day to purchase the right of way and to construct the relator’s 192 miles of road, with its appurtenant grounds and structures, that sum would be a reasonable test of the value of the real estate, assuming that it appears to be a paying institution, with net profits sufficient to pay a reasonable dividend annually upon the capital invested.

The fact that the earnings of the company are large does not increase the value of the real estate beyond what it would cost to buy and build the road.

' The proposition seems very plain that the value of any piece of real estate is what it would cost to buy the land and to build the structures upon it. If that rule is departed from, then we are all at sea and embarrassed with a good many difficulties. If the net earnings of the railroad company is inquired into, that does not relieve the subject. The net earnings grow out of a good many combined quantities.

1. The use of the tracks, depot buildings, terminal grounds, warehouses and workshops.

2. The use of the personalty, in the way of engines, cars, machinery and tools and implements necessary to its management.

3. The energy and business capacity of its management.

4. The authority given by its franchise to levy prices of transporting freight and passengers.

All these, more or less aided or depressed from year to year by the changes and uncertainties of business.

We will be following and respecting the authority of adjudicated cases in making inquiry into ail these circumstances, to aid us in determining values of the real estate of the relator, and at the same time hold fast to the proposition that the true value, so far as it can be ascertained, should be controlled by the sum it would cost at the present day; and although it is concededly difficult to get at an entirely safe conclusion, yet it is no more difficult than when coupled with the other considerations named. Suppose we bring in the question of the net earnings of the road, who can determine:

1. How much of it is due to the real estate ?

2. How much to the rolling stock and personal property in use?

3. How much to the franchise ?

4. How much to the efficiency and personal influence of the management; and other incidental causes ?

In this case, the assessment of the real estate of the village of Fort Edward was illegal and erroneous as contemplated by Chapter 269 of the Laws of 1880.

*132The defendants do not deny, hut admit, that the assessment of the real estate was purposely put upon the roll at one-fifth of its true value. They also, however, assert that the relator is not injured because the property of the relator within said village is also assessed at one-fifth of its true value; and these gentlemen vigorously protest that such assessment was honestly made.

It may not be profitable here, to inquire into, or debate the question as to how the assessors, who admit that they deliberately put the whole real estate of said village at one-fifth of its true value, can sustain the claim of honest intentions. Probably the bad habit of following bad precedents led them to the inconsistency involved.

The statute is explicit, so plain that he who runs may read, making it their duty to estimate all of the property at its full and true value.

These respectable gentlemen could not have appreciated the solemnity of the oath which they added to their work, when they stated on oath that the real estate which they deliberately put down on the roll at one-fifth of its value was assessed at the sum at which they would appraise it in payment of a just debt due from a solvent debtor.

The assessment was grossly illegal, and purposely made so. Any taxpayer of said village could raise the objection; and this relator is entitled either to have the entire assessment set aside, or to have some such relief as is contemplated by the statute.

I think the defendants by their action, in fixing the value of the relator’s property at $45,000, admit in the most solemn manner that sum to be its full value. The relator has a right to so regard it, and, at the same time, it may be accepted that the residue of the property is assessed at only one-fifth of its value; and the burden of proof is on defendants to show that the property of the relator is worth five times the sum thus fixed upon it. It becomes a question of fact on which defendants have the affirmative.

The relator charges that all the property, other than his own, is assessed at one-fifth the value only. This defendants admit. The relator charges that its property, at $45,000, is assessed at its full value. This defendants deny.

The only controverted question is, as to the value of the relator’s property.

Unless it is made tolerably clear by the evidence offered by defendants that the relator’s property is, as a matter of fact, worth five times the sum assessed, it will be the duty of this court to reduce it to the value adopted by the assessors in fixing values upon the residue of the property on the same roll.

The defense has failed to show such value in relator’s property. In fact, the weight of evidence is strongly the other way.

The defense relies upon a single witness who gives opinions of value based upon theories which give much more credit to the real estate than it is entitled to. His opinions are based upon two circumstances only.

*First.*The earnings of the relator’s road for the whole line.

*133*Second.*Upon the amount of rent paid by the relator to the old Rensselaer and Saratoga Company.

This witness descants largely upon the values of incomes and the values of money; calls to his aid the supposed rates and values of British government consolidated loan, and the bonds of the French government; and generally upon the values and rates of interest upon the bonded indebtedness of the different nations of the earth. I am hardly able to see how such knowledge as the witness has upon these subjects has any bearing upon the issue here, or increases his capacity as an expert, as applicable to the value of real estate of relator; and I think little weight is due to such aids, or to an opinion based upon them.

The relator confronts the defense with two expert witnesses, persons with great familiarity with railroading and the management of the business, and who have inquired into the values, based not only upon the earnings of the company and upon the several classes of property in use, but also upon the probable cost of the reproduction of the real estate of the relator at the time the assessment in question was made; so that both circumstances enter into their calculations and opinions.

One of them fixes the value of the real property in question within said village at less than the sum set down upon the roll; and the other makes the value $62,048.

I, therefore, conclude that the last-named sum, reduced to one-fifth thereof, is what justice requires; so that the relator’s property is put upon the same relative value as the residue of the real property on the said roll.

This conclusion, and the basis upon which it is arrived at, is not in conflict, but in harmony, with the most recent adjudicated cases. *People*v. *Hicks,*40 Hun, 598; 2 N. Y. State Rep., 294; *People*v. *Keator,*36 Hun, 592.

In *People*v. *Hicks,*above cited, the court affirm the order of the special term, without attempting to establish any rule; and Justice Bradley thus speaks:

“Ho arbitrary method can be prescribed of ascertaining value. In some cases, the earnings of a road may be entitled to more consideration than others. The cost of the road is also to be usually taken into account.”

The learned judge does not, in that case, speak of the cost of reproduction of a like piece of work at a given time; but when speaking of the cost of the road, he probably meant such cost as would get up the whole structure at a given time.

In the *People*v. *Kealor,*the learned judge who delivered the opinion, in commenting upon the value of certain evidence, allowed that the earning capacity of the company was a safer and more just guide than its cost of construction, the court evidently meaning the cost at the time the road was built, which may have been a long time before the assessment, and at a time when the nrices of material and labor were very different, and since which time the prices of real estate had materially changed; all of which is very sound.

' But if it could be made to appear what sum would reproduce *134the same road and all its structures at the time the assessment was made, such sum would be held the maximum sum of the value of the real estate at the given time.

It might be worth less, but no more. The price that any property, real or personal, can be got for is the highest value that can be put upon it.

Let an order be entered reducing the assessment of relator’s real estate upon the roll in question to the sum of $12,610.

*A. D. Wait,*for app’lts; *Edwin Young,*for resp’t.

Learned, P. J.

This is an appeal from the order of the special term, made on the return to a *certiorari*and on the evidence taken, reducing the assessment of the relator’s real estate from $45,000 to $12,610.

The first thing to be noticed in these proceedings is that the petition for the *certiorari*charges that the real property on the-assessment roll, other than that of the relator, has been assessed, not at its full value, but only at about one-fifth thereof; and that the assessors in their return to the writ admit this; and further assert under oath that the property of the relator and the other real property on said roll was assessed at one-fifth of its full valuation. Thus we have an admission by these assessors that they violated the statute requiring them to assess the property as they would appraise the same in payment of a just debt due from a solvent debtor. 1 E. S., m. p. 393, § 17.

We have also their further admission that the oath attached to the roll under chap. 201, Laws 1885, was false. For that oath contains a statement that" they have estimated the value of the real estate at the sums which a majority of the assessors have decided to be the full value thereof. Since they thus admit the falsity of this oath, and the violation of their duty, no confidence can be put in their assertion that they estimated the relator’s property also at one-fifth of its value. It is equally probable, so far as their oath and their action is concerned, that they estimated it at five times its real value.

We agree with the language of the learned justice, who remarks that “the assessment was grossly illegal, and purposely made so.” We are not sure but that on the face of this admission enough appears to justify the court in striking out altogether any assessment against the relator. The utter falsity of the oath of the assessors, coolly admitted on their return to the *certiorari,*would perhaps be sufficient ground for the relator to assert the invalidity of the assessment against the company. But that question is not here. For the relator does not appeal. But we cannot pass over the matter without a rebuke to these assessors for their gross misconduct.

We are then only to see that the violation of the statute shall be uniform, and that in disobeying its commands, and then taking an oath that they have obeyed them, the assessors treat all with ,$quai partiality. ‘

The learned justice came to the conclusion that the real property of the relator on the roll was worth $63,043, and that as all other *135property was assessed at one-fifth, this must be assessed at $12,610. And probably the authority of chap. 269, Laws of 1880, as to unequal assessments, justifies this mode of rectifying injustice.

The real estate of the relator in Fort Edward consists of seventeen acres, on which are 2.42 miles of main track, 2.85 miles of side track, one freight-house, one water-tank, one engine-house, one store-house, one passenger depot

How it is evident that, while it is not difficult to arrive at a reasonably accurate valuation of the freight-house, tank, etc., it is extremely difficult, if not impossible, to establish a fair valuation of the land on which the tracks lie with its superstructures. The difficulty is in the nature of the case. The piece of the road lying in this town, if not used in connection with the rest of the road, would probably have a very small value, being a narrow strip, unsuitable for any other use than that to which it is now put And again, if it be considered in connection with the rest of the road, even then the profit derived from the working of the road comes largely from the possession and use of engines and cars, and from the ownership of what we may call the franchise.

In *People ex rel.*v. Hicks, 105 N. Y., 198; 7 N. Y. State Rep., 859, the court of appeals, in speaking of the various modes of determining value, says very accurately that they are only tentative; that the earning capacity is simply an aid in determining value in connection with many other matters. The same idea, though not as strongly expressed, is found in the opinion of the general term in S. C. 40 Hun, 601; 2 N. Y. State Rep., 294, and in *People ex rel.*v. *Pond,*13 Abb. N. C., 7. Hone of these cases decide that such a computation as is mentioned in detail in some of the opinions is the sole and conclusive process for ascertaining value. It is in regard to this, as in regard to other real property. An opinion as to its value is the result of many considerations; among them original cost, cost of present reproduction and earning capacity, which is often shown by the rent obtainable.

It is by no means a fair mode of estimating the value of a piece of land to ascertain the net profits which are made upon it or by means in part of its use. For instance, the net amount of profits made in a lawyer’s office would not be any, or at least very little, evidence of the value of the office as real estate.

In the present case we have carefully examined the evidence on both sides. The views of those who have testified as experts are widely conflicting; the relator’s witnesses stating the value in Fort Edward at not over $63,000; the defendant’s witnesses making various estimates of the same real estate according to different calculations from over $500,000 to over $800,000; or again over $236,000. Another estimate of the defendant’s witness is based on the rent paid by the relator to the Rensselaer & Saratoga Railroad Company, and ranges from over *$198,000 to over*$343,-000 for this same land. All of these are estimates of the value of seventeen acres of land in a village, and of land, too, which is evidently not suitable in general for building lots.

How, after looking over these estimates very carefully and over the facts on which they are founded, we see no reason to disagree *136with the conclusion to which the learned justice came at special term. The question, of course, is simply what is . the value of these seventeen acres, according to the rule of the statutes above cited. If that can be determined, then the defendants admit that other real estate is assessed by them at one-fifth of its true value. Of course it follows, under the statute of 1880, that the real estate of the relators must be assessed proportionally.

It does not seem to us that anything would be gained by making, in this opinion, an analysis of the evidence, and of the various modes of computation adopted by the witnesses. We can in the end only say whether, in our opinion, the conclusion of the learned justice on all the facts before him was incorrect. We think that it was not.

Ordinarily, the order would be affirmed, without costs. But the admission of the defendants, that they estimated real property at one-fifth its true value shows such a violation of duty that their assertion that the assessment of the relator’s .property is “ just and equal and in no respect erroneous ” has little weight.

Order affirmed, with costs and disbursements against appellants personally.

Land on, J., concurs.