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.
Where the highest court of a state has decided that the board of
equalization has acted according to the methods prescribed and
authorized by
Page 190 U. S. 413
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.
The plaintiff in error is a telegraph company, incorporated by
the State of New York. It does business in the State of Missouri,
having offices in a number of cities of that state, and its lines
run between those cities and to and from them to other places in
the Union; in other words, the plaintiff in error engages in
intrastate and interstate business. It claims to have no franchises
from the State of Missouri (except in an unimportant instance), but
occupies the streets of its cities, and its public roads and
highways, by authority of the Act of Congress of July 24, 1866,
entitled "An Act to Aid in the Construction of Telegraph Lines, and
to Secure to the Government the Use of the Same for Postal,
Military, and Other Purposes." The material part of section one of
the act is as follows:
"SECTION 1. That any telegraph company now organized, or which
may hereafter be organized, under the laws of any state in this
Union shall have the right to construct, maintain, and operate
lines of telegraph through and over any portion of the public
domain of the United States, over and along any of the
Page 190 U. S. 414
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.
Section four is as follows:
"
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."
Under the Constitution and laws of Missouri, the state board of
equalization, composed of the governor, secretary of state, state
auditor, state treasurer, and attorney general, assesses railroad
and telegraph property, and it also equalizes the real and personal
property assessed by the local assessors. Exercising its powers of
original assessment, the board made the following order in regard
to the property of plaintiff in error:
"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 state board of equalization having given to the Western
Union Telegraph Company opportunity to be heard personally by the
board, and having heard the said company, through its officers and
agents, and having carefully considered the facts set out in the
returns and the statements of said company, and all evidence of
value, and all matters bearing upon
Page 190 U. S. 415
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:"
6,075.98 miles of poles at $71.50 per mile . . $ 434,432.57
23,767.34 miles of wire at $22.02 per mile . . 523,356.82
3,375 instruments at $5.70 each. . . . . . . . 13,537.50
All other property at. . . . . . . . . . . . . 856,400.56
-------------
$1,827,727 45
The apportionment of the tax to Jackson County was as
follows:
For state purposes . . . . . . . . . . . . . . $ 202.43
For county purposes. . . . . . . . . . . . . . 283.40
For road purposes. . . . . . . . . . . . . . . 35.41
For general county school purposes . . . . . . 370.61
For school building purposes . . . . . . . . . 2.98
For other school purposes. . . . . . . . . . . 19.03
For Kansas City municipal purposes . . . . . . 81.21
For Independence municipal purposes. . . . . . 25.38
For Kaw Township railroad purposes . . . . . . 2.03
For Blue Township railroad purposes. . . . . . 4.74
---------
Total . . . . . . . . . . . . . . . . . . . . . .$1,027.22
Page 190 U. S. 416
The case was tried without a jury, and the trial court found
"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."
Judgment was entered against plaintiff in error in the sum of
$605.82, being the tax on the poles, wires, and instruments of the
company, with interest at two percent for collector's fees, and
also for attorney's fees. The amount found due was made a first
lien against the property of defendant in error, and special
execution ordered to be issued. Both parties moved for a new trial,
which motions were denied. Both parties then appealed to the
supreme court of the state, which court reversed the judgment of
the circuit court. After an elaborate discussion of the case, the
supreme court said:
"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.
Page 190 U. S. 420
MR. JUSTICE McKENNA, after stating the facts, delivered the
opinion of the Court.
On the question of fact, if it be such, as to what the item "of
other property at $856,400.56," in the
Page 190 U. S. 421
assessment by the board of equalization, was constituted of the
trial court and the supreme court of the state are not in accord.
The trial court found the
"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."
It is apparent from the court's opinion that, by "franchise,"
the court meant the rights and privileges obtained by the plaintiff
in error under the act of Congress of July 24, 1866. The supreme
court of the state, however, expressed its conclusion from the
evidence as follows:
"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,"
"it did not and could not have included therein any franchise
derived by the defendant from the government of the United States,
because that government had conferred no such franchise; nor was
such a valuation placed upon 'all other property,' a tax upon the
franchise of the defendant company. The franchise derived by the
defendant from the State of New York was considered by the board in
determining the value of the property of the defendant located in
this state. That is, that property was valued not as so many poles,
so much wire, so many instruments, or so much 'other property,' in
the abstract, but was valued in the concrete, in the relation that
such property in the abstract bore to other property in the
abstract, which being brought into relation towards each other --
into a
system, located partly in this state and partly in
other states -- gave each part a concrete value, which was much
greater than its abstract value. The right to exist -- the
franchise -- of the defendant was property, and was subject to
taxation either directly, in the proportion that the portion of the
franchise exercised in this state bore to the proportion of the
franchise exercised in all other states, or indirectly, as was done
in Massachusetts and was done here, by being impressed upon the
Page 190 U. S. 422
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.
Page 190 U. S. 423
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 contentions of the company in that case was, as it is in
this, that it did not derive its existence from the State of
Missouri, but from the State of New York; that it did not do
business in the State of Missouri by permission of that state, but
by virtue of being an instrument of interstate commerce; that its
rights and privileges and franchises were conferred by the United
States and constituted it an agent of the United States, and as
such agent it was exempt from the tax imposed. The contentions were
rejected. The court did not test or measure the power of the state
by the name which its laws gave the tax, and, speaking by Mr.
Justice Miller, said:
"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."
And that power of the state was explained in an elaborate
opinion, and sustained. These propositions were laid down:
Page 190 U. S. 424
That the company owed its existence as a corporation and its
right to exercise the business of telegraphy to the laws of the
state under which it was organized; that the privilege of running
the lines of its wires over and along the military and post roads
of the United States was granted by the act of Congress, but that
the statute was merely permissive, and conferred no exemption from
the ordinary burdens of taxation; that the state could not, by any
specific statute, prevent a corporation from placing its lines
along the post roads or stop the use of them after they were so
placed, but the corporation could be taxed, in exchange for the
protection it received from the state, "upon its real or personal
property as any other person would be." And, describing the
particular tax imposed, it was said:
"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.
These cases establish that, in estimating 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 that the state was not
precluded from taxing the property because the state had not
created the company or conferred franchise upon it, or because it
derived rights or privileges under the Act of July, 1866, or
Page 190 U. S. 425
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.
2. The plaintiff in error asserts that the board of equalization
practiced discrimination against it by assessing at a value
disproportionate to the value assessed on real and personal
property by local assessing officers. This defense was expressed as
follows:
"Defendant avers that, under the law, it was the duty of said
board of equalization to adjust and equalize as aforesaid the
valuation of all real and personal property in the State of
Missouri, among the several counties in the state, and that, during
the period aforesaid, it did so proceed to adjust and equalize such
valuations. That said state board of equalization, by common
arrangement, understanding, and purpose among themselves in fact
did, during the period aforesaid, in violation of the Constitution
and laws of said State of Missouri, with intent to compel defendant
to pay a greater proportion of taxes than the owners of other real
and personal property in said State of Missouri, assess all
property, to-wit, other than the property of the telegraph
companies, to-wit, from thirty-five to forty percent of its true
value, whereby, as to taxes levied upon real and personal property
other than telegraph property in the State of Missouri, this
defendant was unlawfully and wrongfully discriminated
Page 190 U. S. 426
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 Supreme Court of Missouri held, however, that plaintiff in
error could not, even under the cases cited by it, avail itself of
the defense. The court said:
"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."
We concur in this view. The proceedings before the board were
quasi-judicial, and the order made by it was within its
jurisdiction. It was not void on its face, and cannot be resisted
in an action at law. This is the principle announced in the case
referred to. In
Stanley v. Supervisors of Albany,
121 U. S. 535, is
cited, among other cases,
Balfour v. Portland, 28 F. 738.
The case is especially pertinent. The action was at law for the
recovery of taxes paid under protest which had been levied upon
property which, it was charged, had been deliberately overvalued.
Recovery was denied. The circuit court said:
"The property was subject to taxation by the authority and for
the purpose alleged. True, the result reached was erroneous because
of the willful disregard in the proceeding of the law requiring
uniformity in the valuation of property for taxation
Page 190 U. S. 427
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."
So this Court said in
Stanley v. Albany County:
"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.
Judgment affirmed.
MR. JUSTICE BREWER concurs in the result.
MR. JUSTICE WHITE and MR. JUSTICE PECKHAM dissent.
