Court Opinion

ID: 9308176
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:18:51.734301+00
Date Added: 2024-06-11T17:14:00.832497
License: Public Domain

TAFT, Circuit Judge
(after stating the facts as above). The sections of the statute quoted above, under which it is proposed to levy the tax in this case, have been construed by the supreme court of the United Btates. In the case of Adams Exp. Co. v. Kentucky, 166 U. S. 171, 17 Sup. Ct. 527, it was held that, taking the whole act together, and in view of the provisions of Ky. St. §§ 1078 — 1081, it was evident that the word “franchise” was not employed in a technical sense, and that the legislative intention was plain that the entire property, tangible and intangible, of all foreign and domestic corporations, and all foreign and domestic companies possessing no franchise, should be valued as an entirety, the value of the tangible property be deducted, and ¡he value of the intangible property thus ascertained be taxed under these provisions. It is apparent, moreover, from a consideration of the opinion filed on the petition for rehearing in 166 U. S. 185-217, 17 Sup. Ct. 601, 607, that, in the judgment of the court, this intangible property consisted of privileges, corporate; franchises, and obligations. Mr. Justice Brewer in that case, speaking for the supreme court, said:
“The franchise to do is an independent franchise, or rather a combination of franchise's, embracing all things which the corporation is given power to do, and (his power to do is as much a thing of value and a part of the intangible property of the corporation as the franchise to be. Franchises to do go< wherever Hie work is done. The Southern Pacific Railway Company is a corporation chartered by the state of Kentucky, yet, -within the limits of that state, it is said to have no tangible property and no office for the transaction of business. The vast amount of tangible property which, by lease or otherwise, it holds and operates, and all the franchises to do which it exercises, exist and are exercised in the states and territories on the Pacific Slope. Do not these intangible properties, — these franchises to do, — exercised in connection with the -tangible property which it holds, create a substantive matter of taxation, to be assented by every stale in which that tangible property is found?’
See, also, Bridge Co. v. Dix, 6 How. 541.
The trustees of the Cincinnati Southern Railway were given a right to construct, maintain, and lease a railway running from Cincinnati south through the state of Kentucky. They were vested, therefore, with the franchise to construct, own, and lease to an operating company an instrumentality for a public purpose, to wit, a railway. This is the in tangible property on which the tax in the sections above quoted is levied, and the question is whether a tax upon such a franchise must be paid by the lessee (the defendant company) under the terms of tin; lease. Clause 3 is drawn in as general terms as possible;. It was evidently the purpose to secure to the city of Cincinnati a net, rent, without any deduction for taxation arising from its ownership of the Cincinnati Southern Railway. By clause 3, the lessee agrees to pay all taxes, assessments, duties, imposts, and charges whatsoever which may be imposed during the term, by any governmental or lawful authority, upon the premises leased, or any part thereof, or upon any business or earnings or income of the same, or by reason of the ownership thereof. And it is recited to be the true intent of this clause that all governmental charges upon the properly or the income, imposed by any governmental authority capable of enforcing them, through, upon, or against the property of the corporation owning, or the party leasing, the same, *592stall be satisfied by the party of the second part, whatever the form in which such charge may be. The tax against the trustees of the Cincinnati Southern Railway is a tax upon its franchise to construct, own, and lease the railway, and is therefore a tax imposed “by reason of .the ownership” of the railway, and so is within the words of clause 3.. The latter part of clause 3 (the interpreting part thereof) gives plausibility.to the contention that it limits the meaning of the clause to charges “upon the property or income therefrom.”' Reading the whole clause together, however, I am convinced that the interpreting words were added for the purpose, not of cutting down what had gone before, but for the purpose of enlargement, by a specification that the obligation to pay should exist whether the tax was imposed on the property, or against the corporation owning it, or against the party leasing it; and that the words, “charges upon the aforesaid property or income therefrom,” were not intended to limit the meaning, or diminish the scope, of the words, “or upon any business earnings or income of the same or by reason of the ownership thereof.” For these reasons, I think the lessee is bound to pay the franchise tax levied against the trustees, if that tax is a valid tax. I do not pass upon the question whether it is a valid tax against the trustees, because that question has not been argued, and no issue is made upon it in the pleadings. If it is deemed by the receiver or trustees to be a question of sufficient doubt to justify litigation, he or they may take such course as they may be advised. Let an order be entered embodying this conclusion, and taxing the costs of this proceeding against the receiver.