Court Opinion

ID: 6415141
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:55:36.551087+00
Date Added: 2024-06-11T15:51:31.189643
License: Public Domain

Wells, J.
This case stands upon the same ground as Commonwealth v. Boston Wharf Co. 12 Allen, 298. The defendants complain that the valuation, upon which the amount of the tax is computed, is excessive and unreasonable, and therefore that eithei the tax is entirely invalid, or the defendants are entitled to be relieved to the extent of the excess. The return made by the treasurer of the corporation stated the market value of the shares. This return, verified by information of actual sales of such shares, governed the tax commissioners in fixing the value of the aggregate capital stock upon which the tax was laid. It is not contended that there is any error in the tax if the standard adopted by the commissioners is the correct and proper one by which to determine its amount. But the defendants contend that the value so computed is an artificial one, and greatly in excess of the real value of the entire property of the corporation ; and that the commissioners erred in disregarding entirely the actual pecuniary condition of the corporation and the value of its real and personal property.
The court are of opinion that, in the estimate or computation of the value of the capital stock of the corporation, the judgment of the tax commissioners is not open to modification or revision by any other tribunal. But, if this were otherwise, we are all of opinion that the standard adopted by the commissioners was the correct one. The computation or estimate to be made by them is in no legal sense a valuation of the property of the corporation. The returns required from the corporation furnish no means for such a valuation; and the statute neither requires nor contemplates it. The corporation is to return “ the cash market value of the shares; ” and the commissioners are to “ascertain” the “market value of all the capital stock” of the corporation. If the corporation fails to make the returns, or if the commissioners are not'satisfied with the returns made, they may seek information and ascertain the true market value “ otherwise.” But whether they ascertain the value from the returns, *22or obtain it “ otherwise,” the valuation that is to be ascertained is nothing else than the market value of all the shares of the capital stock of the corporation. This court held, in the case of Chicopee v. Hampden, 16 Gray, , that the market value of all the shares of the capital stock was not the proper measure of the value of the property of a corporation; and the converse must be equally true, namely, that the property held by a corporation does not furnish a proper measure of the value of its capital stock regarded as a franchise. The market value of corporate stock must be determined like the market value of any other commodity, by the price that it commands upon actual sales. This is undoubtedly what was intended by the statute; and the mode adopted by the commissioners to ascertain the value of the capital stock conformed both to the letter and the spirit of the law.
The provision of the sixteenth section of the act, that corporations shall, when required, submit their books to the inspection of the commissioners, does not imply an investigation and valuation of their property, unless such investigation becomes necessary by reason of the absence of other means of information by which to determine the value of the stock. It sometimes occurs that all the shares of a corporation are held in a few hands, and so controlled that no sales take place, and no means of ascertaining the market value of the shares can be reached. In such cases an inspection of the books showing the amount and kind of investments, the nature and extent of the business, and the amount of profits realized, would afford the means of a reasonable approximation to the value of the shares of the corporate stock. But when the commissioners have.arrived at their valuation, in this as well as in the other modes which are open to them, the result is, both in form and in legal intendment, “ the market value of all the capital stock ” as made up of the aggregate of the incorporeal shares, and not as consisting of the real and personal property held by the corporation.
The deduction, from the value of all the capital stock thus ascertained, of the value of the real estate and machinery returned as subject to local taxation, does not indicate that the *23“ excess ” thus obtained represents in any sense the other personal property of the corporation, nor that it is intended as the measure of the value of such other property. The legislature saw fit to relieve corporations from the burden of this tax to the extent to which they were subject to local taxation upon their property; and this purpose could be effected with greatest simplicity and uniformity by the mode adopted.
Upon all these considerations we are clear in opinion that the correctness of the valuation, ascertained from the market value of the shares in the manner stated in this case, cannot be impeached by proof that it is greatly in excess of all the “ property, rights and assets” owned or held by the corporation. It does not depend upon the question whether the corporation has more or less of property, nor in what that property consists.
The defendants contend further that the franchise of a mere land company cannot be said to possess any value beyond that belonging to the property of the corporation ; that in these cases the market value of the shares was fictitious and speculative only, and greatly in excess of all property and rights belonging to the corporation; and therefore that, even as a franchise tax, this, as imposed upon these defendants, is an unreasonable tax, in a sense obnoxious to the limitation of the Constitution. We cannot accede to the premises upon which this argument is founded. The franchise of a mere land company has a value beyond that belonging to the property itself. The combination of capital; the capacity to hold and manage large amounts of real estate under one direction, free from competition among those interested, from change by death and disturbance by the chances of individual life; whereby the ultimate development and gradual sale may be secured in the most advantageous manner possible; and many other considerations which readily suggest themselves, make the privilege of a corporate organization in such cases one of great value and importance. The very magnitude of the entire estate, when held in individual hands, will depress its gross value in the market; while, under corporate ownership and management, the separate shares, which give to the holder the assurance of participation in the *24future development and appreciation of the property, will command a much higher proportionate price. The convenience with which the interests of the several shareholders are held, and the facility of transfer of the shares, are elements of great influence in giving value to the capital stock. And we are not prepared to say that even a merely speculative value, conferred upon stock by the advantages of its corporate character and the privileges thereto pertaining, may not afford a proper basis for the imposition of a tax like this.
Upon the question of the reasonableness of the excise, as imposed in this case, the fact is not to be overlooked that the same statute which imposes the tax upon the corporation also relieves the shareholders from the burden of local taxation, to which the shares had been previously subject as personal estate in their hands; and that in such local taxation the same mode of determining the value of the shares was necessarily adopted.
We cannot doubt that an excise tax so laid is reasonable, in the sense of the constitutional provision; and that no apparent discrepancy between the value of the corporate stock, as such, and the amount or value of the property in the present possession and ownership of the corporation, is of itself a ground upon which to defeat, either in whole or in part, the collection of the tax imposed according to a valuation of the stock at the price which is fixed in the market by actual sales of the shares.
According to the agreement, therefore, judgment is to be entered for the plaintiff for the full amount of the tax with interest.*

 A similar decision was made at the same time in the case of Commonwealth vs. Boston Water Power Company, which was submitted fon decision upon the arguments in the foregoing case.