Source: http://supreme.nolo.com/us/193/490/case.html
Timestamp: 2019-04-21 07:09:33+00:00

Document:
While a state can tax property permanently within its jurisdiction although belonging to persons domiciled elsewhere and used in commerce between the states, it cannot tax the privilege of carrying on such commerce, nor can it tax property outside of its jurisdiction belonging to persons domiciled elsewhere.
A state assessment upon an express company of another state proportioned to mileage is bad when it appears that the total valuation is made up principally from real and personal property, not necessarily used in the actual business of the company and which is permanently located in the state where the company is incorporated.
The transmission of such an assessment by a state board to the auditors of the several counties may be enjoined.
Where the assessment is void as made, and a question is raised in the bill whether any assessment can be levied, an offer to give security to the satisfaction of the court for the payment of any sum ultimately found due is sufficient without a tender of any sum.
This is an appeal from a decree of the United States circuit court dismissing the plaintiff's bill and supplemental bills. The bill was brought by the president of the American Express Company, a joint stock company of New York, on behalf of himself and the other members of the company, to enjoin the Auditor of the State of Indiana from certifying an assessment for 1898 to the auditor of the several counties of the state.
the company as a part of the necessary capital of its business, and denies that the board assesses personal property not used in connection with its business. Thus, he admits, by implication, that the above sum did enter into the assessment made, and this would be obvious unless we should assume the intended tax to be wholly arbitrary, as the assessment was at the rate of four hundred and fifty dollars a mile for 1,798 and a fraction miles, amounting to $809,253, as against less than eight thousand dollars worth of tangible property in the state. There are some differences of detail between the state and the company as to the precise value of the stock, etc. But the foregoing facts present the general question.
nearly one hundred and thirty thousand miles in 1898, with comparatively slight explanation, or the admitted differences between the ocean and land carriage, we cannot say that the tribunal, having the duty and sole jurisdiction to find the facts, exceeded its powers in not allowing the item.
assets of the company. For if the former was the starting point it appears from what we have said that the tangible assets gave the stock its value. The use of the value either of total stock or total assets is only as a means of getting at the true cash value of property within the state. Western Union Telegraph Co. v. Taggart, 163 U. S. 1, 163 U. S. 26-27; Pullman's Car Co. v. Pennsylvania, 141 U. S. 18, 141 U. S. 25.
The general principles to be applied are settled. A state cannot tax the privilege of carrying on commerce among the states. Neither can it tax property outside of its jurisdiction belonging to persons domiciled elsewhere. On the other hand, it can tax property permanently within its jurisdiction although belonging to persons domiciled elsewhere and used in commerce among the states. And when that property is part of a system and has its actual uses only in connection with other parts of the system, that fact may be considered by the state in taxing, even though the other parts of the system are outside of the state. The sleepers and rails of a railroad, or the posts and wires of a telegraph company, are worth more than the prepared wood and the bars of steel or coils of wire, from their organic connection with other rails or wires and the rest of the apparatus of a working whole. This being clear, it is held reasonable and constitutional to get at the worth of such a line, in the absence of anything more special, by a mileage proportion. The tax is a tax on property, not on the privilege of doing the business, but it is intended to reach the intangible value due to what we have called the organic relation of the property in the state to the whole system. Western Union Telegraph Company v. Taggart, 163 U. S. 1, 163 U. S. 21-22. And this principle, established by many cases, has been extended by the cases first cited above to the lines of express companies, although those lines are not material lines upon the face of the earth. There is the same organic connection as in the other cases.
outside the state, under the name of enhanced value or goodwill, if it is not closely confined to its true meaning. So long as it fairly may be assumed that the different parts of a line are about equal in value, a division by mileage is justifiable. But it is recognized in the cases that if, for instance, a railroad company had terminals in one state equal in value to all the rest of the line through another, the latter state could not make use of the unity of the road to equalize the value of every mile. That would be taxing property outside of the state under a pretense. Pittsburgh, Cincinnati, Chicago & St. Louis Ry. Co. v. Backus, 154 U. S. 421, 154 U. S. 431; Western Union Telegraph Co. v. Taggart, 163 U. S. 1, 163 U. S. 23. The same principle applies to personal property which the state would not have the right to tax directly. Adams Express Co. v. Ohio State Auditor, 165 U. S. 194, 165 U. S. 227, s.c., 166 U. S. 166 U.S. 185, 166 U. S. 222-223. In Pittsburgh, Cincinnati, Chicago & St. Louis Ry. v. Backus, there was reason to suspect an infraction of constitutional rights, but the secretary of state testified that there was no assessment of property outside the state (154 U.S. 154 U. S. 434), and therefore the Court could not say that there was more than a possible overvaluation by the board. Of course, if the board did not go beyond its jurisdiction, its decision was final. But the Court recognized that, if the facts charged had appeared, the case would have been different. In the Express Companies' cases previously decided, it was pointed out that there was nothing to show that the lien might not fairly be assumed to be of substantially the same value throughout. But it was intimated on the pages just cited that, if the companies should prove the fact to be otherwise, a different rule would apply, and the statutes were construed not to prevent such a difference from being taken into account.
assume that the board was of a different opinion, so far as that was concerned, and still we may hold its action unjustified. It will be seen that we are dealing with much more attenuated relations than when there is a physical line of rails or wires to be valued, every mile of which is a necessary condition of the use of the rest of the lines beyond, and therefore a reflex condition of the value of the line behind it. The case is stronger even than one of terminals having a large value as real estate independent of their use to the road. The express business added nothing to the value of the bonds in New York. Conversely, the utmost extent to which those bonds entered into the value of property in Indiana was insofar as they helped to make the public believe that the express company could be trusted, and therefore increased its goodwill. That they made a part of the public more willing to buy interests in the company because they were an assurance against personal liability was no concern of Indiana. But it is obvious that, merely from the point of view that the express company could be trusted by the public with the carriage of goods or money, the goodwill could not be measured by the assets. In the first place, the public knew nothing of the amount. This appears as to even the more instructed portion of the public which bought interests in the concern, and a fortiori as to the general run of shippers. For if even the buyers of the stock of the company would pay only in the neighborhood of the value of the tangible assets, it is apparent either that they did not know what the assets were, as was stated by the appellant's counsel, or else that the goodwill taxed was worth nothing, and either view is equally fatal to the grounds for the tax.
things by express employ a company simply because it is there, and they see its sign is out. The only effect that knowledge of the capital of the company could have would be to produce the conviction that the company was safe to employ. Assume that something is to be added to the goodwill of a company because it is safe, and that the goodwill, or a part of it, of the express business in Indiana may be considered in assessing its property there, this is very different from measuring the goodwill by the capital, when the facts appear as they do in this case. The difference is not a mere difference in valuation, it is a difference in principle, and in our opinion the principle adopted by the board was wrong. It involved an attempt to tax property beyond the jurisdiction of the state, and to throw an unconstitutional burden on commerce among the states. The result has been that, taking the value of the stock as stated by the defendant to have been 125 for 1898, the state of Indiana assessed the company for nearly twice the total goodwill of its business, measuring that goodwill by the difference between the tangible assets and the total value of the stock. The injustice grew less flagrant as the stock rose, but in the year 1901 the assessment still was nearly double what the state had a right to assess, assuming that, without transcending its constitutional power, it had a right to assess its proportion by mileage of the total goodwill.
We have explained why, in our opinion, this cannot fairly be treated as a mere case of overvaluation, but is an assessment made upon unconstitutional principles. Under such circumstances, it was impossible for the company to tender any sum, because it was impossible for it to say what, if anything, it ought to pay. It denied that, under the Constitution, it ought to pay anything, and it is plain that, for the year 1898, at least, it properly could have been assessed but a comparatively trifling sum. The contention of the company was serious and plausible. It made the only offer it could, which was to give security for the payment of whatever amount should be adjudged to be due.
all, . . . an assessment under such circumstances would be void, and, of course, no payment or tender of any amount would be necessary before seeking an injunction."
People's National Bank v. Marye, 191 U. S. 272, 191 U. S. 281. See also Santa Clara County v. Southern Pacific Railroad, 118 U. S. 394; California v. Central Pacific Railroad, 127 U. S. 1; Central Pacific Railroad v. California, 162 U. S. 91, 162 U. S. 112.
The assessment being bad for the reasons which we have stated, the board of tax commissioners acted without jurisdiction, according to the decision of the Supreme Court of Indiana. Hart v. Smith, 159 Ind. 182. We do not abate at all from the strictness of the rule that, in general, an injunction will not be granted against the collection of taxes. State Railroad Tax Cases, 92 U. S. 575. But it was recognized in the passage just quoted from People's National Bank v. Marye that, under the present circumstances, a resort to equity may be proper. The course adopted is the same that was taken without criticism from the court in Adams Express Co. v. Ohio State Auditor, 165 U. S. 194. It avoids the necessity of suits against the officers of each of the counties of the state, and we are of opinion that the bill may be maintained. Union Pacific Ry. v. Cheyenne, 113 U. S. 516; Pittsburgh, Cincinnati, Chicago & St. Louis Ry. v. Board of Public Works, 172 U. S. 32.
THE CHIEF JUSTICE, MR. JUSTICE BREWER, and MR. JUSTICE DAY dissented.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.