Source: https://www.legalcrystal.com/case/89468/western-union-telegraph-co-vs-missouri-gottlieb
Timestamp: 2019-04-18 18:56:46+00:00

Document:
Appellant Western Union Telegraph Co.
1. In estimating, for purposes of taxation, the value of the property of a telegraph company situate within a state, it may be regarded not abstractly or strictly locally, but as a part of a system operated in other states, and the taxing state is not precluded from taxing the property because it did not create the company or confer a franchise upon it, or because the company derived rights or privileges under the act of Congress of 1888, or because it is engaged in interstate commerce.
the laws of the state and that an order made by it is legal under the state constitution and statutes, the decision constitutes an interpretation of the law of the state, and is not open to dispute in this Court.
2. Proceedings before a board of equalization are quasi -judicial, and if an order made by it is within its jurisdiction, it is not void and cannot be resisted in an action at law; nor can overvaluation be made a ground of defense at law. The action of the tax officers, being in the nature of a judgment, must be yielded to until set aside. And this can only be done in a direct proceeding.
The defendant in error is the tax collector of Jackson County, Missouri, and brought this action against the plaintiff in error in the circuit court of that county for the sum of $1,027.22, the taxes assessed against plaintiff in error for the year 1899, apportioned to Jackson County. The answer of the plaintiff in error alleged illegality in the taxes upon two grounds: first, that the taxes were levied upon the franchise of the plaintiff in error, derived from the United States under certain acts of the Congress; second, that the state board of equalization, intending to injure the plaintiff by compelling it to pay an excessive and disproportionate share of state and local taxes, assessed its poles, wires, and instruments at far more than their actual value.
military or post roads of the United States which have been or may hereafter be declared such by an act of Congress, and over, under, or across the navigable streams or waters of the United States: Provided, That such lines of telegraph shall be so constructed and maintained as not to obstruct the navigation of such streams and waters or interfere with the ordinary travel of such military or post roads."
Section two provides that the messages between the officers and agents of the government shall have priority, and be sent at rates to be fixed by the Postmaster General.
Section three forbids the transfer of the rights conferred by the act.
Section four gives the United States the power to purchase the telegraph lines, property, and effects of any company availing itself of the benefits of the act.
" And be it further enacted, That before any telegraph company shall exercise any of the powers or privileges conferred by this act, such company shall file their written acceptance with the Postmaster General of the restrictions and obligations required by this act."
"State of Missouri, office of state auditor."
"Be it remembered that heretofore, to-wit, on the twenty-fifth day of July, 1899, the following, among other proceedings, were had by the state board of equalization, viz.:"
the question of the value of the property of said company, and considering the cost of construction and equipment of said Western Union Telegraph Company, and the location thereof, and its traffic and business, and the market and par value of its stocks and bonds, and the gross receipts and net earnings and franchise owned by said company, and the value thereof, and having received evidence concerning the value of the cost of construction of said telegraph line, and the market value and par value of the stocks and bonds, and the gross receipts and net earning power, and the franchise and value thereof, and having heard evidence upon and considering all other matters ascertainable by said board bearing upon the question of the value of said company which, in the opinion of the board, would assist in its findings, conclusions, and judgment in arriving at the actual cash value of the property of said telegraph company; on motion the state board of equalization assesses and values for taxes of 1899 the property of said Western Union Telegraph Company at $1,827,727.45, and it is further ordered by the state board of equalization that the assessed value thereof be distributed upon the classes of property as follows:"
"the fact to be from the evidence and the pleadings that the defendant owned in the State of Missouri at the time of said assessment the poles, wires, and instruments of the value hereinbefore set forth. And the court finds the fact to be from the evidence that, in valuing 'all other property' of defendant, the state board took into consideration the franchise of defendant company, and the court finds under the law, and so declares, that the franchise of defendant company is not subject to valuation and taxation, and, as to this item of the above-named valuation, the court finds the issues for the defendant."
"It follows that the judgment of the circuit court holding the tax assessed against 'all other property at $856,400.56' to be unlawful is erroneous, and that the plaintiff is entitled to a judgment for the whole amount of the tax sued for. Judgment is accordingly entered here for the plaintiff for $1,027.22, back taxes for the year 1899, with interest thereon from the first of January, 1900, at the rate of one percent per month, Rev.Stat. 1899, sec. 9225, and costs."
This writ of error was then sued out. Other facts appear in the opinion.
MR. JUSTICE McKENNA, after stating the facts, delivered the opinion of the Court.
"fact to be from the evidence that, in valuation 'of other property' of defendant, the state board took into consideration the franchise of defendant company."
"So that when, in determining the value of the property of the defendant in this state, the board of equalization took into consideration"
"the cost of construction and equipment of said Western Union Telegraph Company, and the location thereof, and its traffic and business, and the par value of its stock and bonds, and the gross receipts and net earnings and franchises owned by said company, and the value thereof,"
tangible property owned by it, thereby increasing its value, and by considering the franchise and its tangible property as a system, and then assessing the part of the property forming a part of the system and located in Missouri as of its proportionate value of the whole property constituting the system."
Plaintiff in error asserts the correctness of the finding of the trial court, and insists that it is the only finding that could have been made, and bases the argument against the taxes assessed on that insistence. But if the finding on the question is one of fact, necessarily we are bound by that made by the supreme court of the state. The trial court picked out the rights given to the defendant under the act of Congress, denominated them a franchise, contemplated the franchise as a distinct proprietary entity, and, because it was derived from the federal government, decided that it was exempt from taxation. The necessary consequence was and is to destroy the relation between that franchise and the other properties of the plaintiff in error, regarding them not as parts of the system, but abstractly -- regarding the poles not differently from other poles, the wire not different from other wire. The supreme court, on the contrary, regarded the properties as related and as constituting a system, and because of their relation having a value greater than the sum of the values of the individual things regarded merely as such. Viewing the order of the board of equalization as the supreme court viewed it, was it valid? In other words, is the state, in exercising its taxing power, limited to assessing the mere material things used by the plaintiff in error, and must it regard them as of no greater value than they had when they reposed in lumber yards and factories, with cost added of putting them in place? Or the proposition may be stated another way which better expresses the ultimate contention of the plaintiff in error. Conceding that the tangible property of the telegraph company derives value from its use in a system, does the company do business in the state in pursuance of the Constitution of the United States and the Act of July, 1866, and become thereby an instrument of interstate commerce and a government agent, and as such exempt from the taxation contested in this case? We think the question has been answered by this Court.
In Western Union Telegraph Co. v. Massachusetts, 125 U. S. 530 , the effect of the Act of July, 1866, upon the power of the state to tax the property of telegraph companies was considered. The laws of Massachusetts imposed a tax upon the Western Union Telegraph Company on account of the property owned and used by it within that state, the value of which was ascertained by comparing the length of its lines within the state with the length of its entire lines. The tax was sustained. The Act of July, 1866, was urged against the tax as it is urged here.
"The argument is very much pressed that it is a tax upon the franchise of the company, which franchise being derived from the United States by virtue of the statute above recited, cannot be taxed by a state, and counsel for appellant occasionally speak of the tax authorized by the law of Massachusetts upon this as well as all other corporations doing business within its territory, whether organized under its laws or not, as a tax upon their franchises. But by whatever name it may be called, as described in the laws of Massachusetts, it is essentially an excise upon the capital of the corporation. The laws of that commonwealth attempt to ascertain the just amount which any corporation engaged in business within its limits shall pay as a contribution to the support of its government upon the amount and value of the capital so employed by it therein."
"The tax in the present case, though nominally upon the shares of the capital stock of the company, is in effect a tax upon that organization on account of property owned and used by it in the State of Massachusetts, and the proportion of the length of its lines in that state to their entire length throughout the whole country is made the basis for ascertaining the value of that property. We do not think that such a tax is forbidden by the acceptance on the part of the telegraph company of the rights conferred by section 5263 of the Revised Statutes, or by the commerce clause of the Constitution."
In other words, the lines in Massachusetts were regarded as a part of a system, and assessed accordingly.
The statute of Massachusetts came up again for consideration in Massachusetts v. Western Union Telegraph Co., 141 U. S. 40 , and the principles announced in Western Union Telegraph Co. v. Massachusetts, supra, were affirmed and followed. See also Ratterman v. Western Union Telegraph Co., 127 U. S. 411 ; Leloup v. Port of Mobile, 127 U. S. 640 .
was engaged in interstate commerce. Every one of the fundamental propositions therefore contended for by plaintiff in error those decisions declare unsound.
But it is contended that the method of assessment followed in those cases was sustained because they were prescribed by the legislature, and that, in the case at bar, the method adopted was not prescribed or authorized by the laws of Missouri. The answer is obvious. What the laws of Missouri authorized was competent for the Supreme Court of Missouri to decide, and it decided that the order of the board of equalization was legal under the Constitution and statutes of the state. The decision, constituting as it does an interpretation of the Constitution and laws of the state, is not open to dispute here. If it were, it would seem incontestable that the state could either prescribe the method or confer upon its taxing officers the power to adopt a suitable one. And there is nothing in the Adams Express Company cases, 166 U. S. 171 , 166 U. S. 225 , to the contrary.
against to the extent of sixty percent of the amount of taxes assessed by said state board of equalization and levied by the taxing officers of the state upon defendant in pursuance of such assessment."
Testimony was introduced to sustain the averments.
"The defendant cannot avail itself of these cases, for the reasons (1) that it seeks to raise the question of discrimination by a defense to an action at law to collect the taxes, and thereby collaterally attacks the judgment of the board of equalization; (2) that such questions can only be raised by a direct attack, in equity, and then only upon the condition precedent that it pays or tenders the amount justly due and only asks to have the collection of the excess restrained. This the defendant has not done in this case. It simply alleges a discrimination or excessive tax, and then seeks to defeat the whole assessment without paying or tendering anything, notwithstanding it admits by its answer and its proofs that it has property in this state subject to taxation of the value of $541,472.40. Upon the authority of the cases relied on by it, this cannot be done."
within the jurisdiction of the defendant. Still, the proceeding being quasi -judicial and the subject matter within the jurisdiction of the officers who conducted it, the result reached is so far conclusive that the legality of it cannot be questioned in an action at law to recover back the one-half of the tax as illegal."
"It is only where the assessment is wholly void, or void with respect to separable portion of the property, the amount collected on which is ascertainable, or where the assessment has been set aside as invalid, that an action at law will lie for the taxes paid, or for a portion thereof. Over-valuation of property is not a ground of action at law for the excess of taxes paid beyond what should have been levied upon a just valuation. The courts cannot, in such cases, take upon themselves the functions of a revising or equalizing board. Newman v. Supervisors, 45 N.Y. 676, 687; National Bank v. Elmira, 53 N.Y. 49, 52; Bruecher v. Village of Port Chester, 101 N.Y. 240, 244; Lincoln v. Worcester, 8 Cush. 55, 63; Hicks v. Westport, 130 Mass. 478; Balfour v. Portland, 28 F. 738."
And we think overvaluation of property cannot be a ground of defense at law. In other words, the action of the tax officers, being in the nature of a judgment, must be yielded to until set aside. This can only be done in a direct proceeding. The property owner is in effect a plaintiff, and the condition of relief against the enforcement of the quasi -judicial order, which he attacks, is a tender of payment of the taxes that he ought to pay. And this condition would still be upon him if he set up overvaluation as an equitable defense to an action brought against him. Los Angeles v. Ballerino, 99 Cal. 594, 597. This certainly would be so in Missouri, under the doctrine expressed by the supreme court of the state in the case at bar.
MR. JUSTICE BREWER concurs in the result.
MR. JUSTICE WHITE and MR. JUSTICE PECKHAM dissent.

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