ATTORNEY GENERAL V. WESTERN UNION TEL. CO.
ATTORNEY GENERAL 'IJ. WESTERN UNION TEL.
(Oircuit Oourt, lJ. Ma88achu8etts. November 28, 1887.)
TELEGRAPH COMPANIES-TAXATION-POWER OF STATE.
Pub. St. Mass. c. 13; 40. provides that every railroad and telegraph company shall pay annually a tax upon its corporate franchise, at a valuation thereof equal to the aggregate value of the shares in its capital stock. after deducting from such valuation such portion as is proportionate to the lengtpof the line lying without the state; and also an amount equal to the valult of the real estate and machinery located and subject to loca: taxation within the state. Held, that the rigllt· to tax telegraph companies under this statutE' . is not impaired by Rev. St. U. S. §§ 5263-5266, conferring certain privileges 01\ telegraph companies.
TAXATION OF TELEGRAPl1
CONSTITUTIONAL LAW -INTERSTATE COMMERCE COMPANIES.
railroad and telegraph companies. is not void as repugnant to Const. U. 8. art. 1, § 8, which gives congress power to regulate commerce between the seT· eral states. 1
A tax levied under Pub. St. Mass. c. 13, § 40. providing for the taxation 01
In Equity. Harvey N. Shepard, Asst. Atty. Gen., for complainant. George S, Hale, for defendant.
COLT, J. This is an information filed by the attorney general Massachusetts under section 54, c. 13, of the Public Statutes of Massa· chusetts, to collect a tax claimed to be due, and for an injunction re straining the defendant from the further prosecution of its business until such tax is paid. The defendant is a telegraph company organized under the laws of the state of New York for purposes of business and profit, and having a capital stock divided into shares. On or about June 12, 1867, the company filed its. written acceptance with the postmaster general of the United States of the restrictions and obligations required by the act of congress of July 24, 1866, relating to telegraphs. Rev. St. §§ 5263-5269. By section 5263, it is provided that any telegraph company, organized under the laws of any state, shall have the right to construct, maintain, and operate lines of telegraph through and over portion of the public domain of the United States, over and along an} of the military or post roads of the United States which have been, OJ may hereafter be, declared such by law, and over, under, or across thfl navigable streams or waters of the United States. The information wal!' originally filed in the state court, April 27, 1886, and removed to thil' court by the defendant. On May 1, 1885, the defendant owned or con· trolled under lease or otherwise, 146,052.60 miles of telegraph lines, of which 2,833.05 were situated within the state of Massachusetts. In September, 1885, the tax commissioner, in the manner required by thf' laws of the state, estimated the fair cash valuation of the stock of th.. corporation on May 1,1885, at $47,500,000, and allowed as credits, for
1 interstate commerce in general, SAe Pearson v. Distillery Co., (Iowa,) 84 N. W. Rep. 1. and note. .
shares held by the company unissued, and stocks in other companies outside of its system, $8,773;622.70; leaving $38,713,924. The commissioner considered the valuation of the corporate franchise of the defendant subject to taxation in 'the state to be $750,952, and he assessed a tax thereon of $10,618.46. ¥ore than 2,334.55 miles of the line within the state are over, underjor across post-roads, but the commissionerignored this fact. The' defendant has continually transmitted niessages over its lines on said post-roads between the several departments of the United States government, at rates fixed by the postmaster generll,.l, as required by the a,et ofJu]y 24,1866, (Rev. St. §5266.) It is, impossible .for the company to determine what portion of any sums received were for services performed in the state in the transmission through the state, or any portion thereof, of messages received or delivered out of it, or what portion ofany sums received were for services not on lines of said post-roads; but approximately 70 per celit. of the receipts were for messages received and delivered out of the state. The defendant on May 1, 1885, owned a large amount of real estate, subject to local taxation out of the stute of Massachusetts, on which there was assessed and pai¢[ more $48,000 of taxes. ,In the assessment of the tax herein complained or' no allowance or deduc.tlon was made for this, and. in ascertaining the valuation of defendant's franchise for the purposes of t.f!.xatiqn, no account was taken of said real estate, or buildings, or the taxe!Spaid thereon.··' The position taken by the defendant hl thatthis tax, under' chapter 13 of Public Statutes of Massachusetts, is illegal-Firat, ,because,of its operation and effect upon a fran\lhise granted by thEl Uriited and used for its purposes and benefit; second, because it is a tax upon interstate or foreign commerceithird, because it is in effect levied upcm real estate located and taxed in another state. There is nothing itl ,the' f!.ct of July 24, 1866, conferring certain privileges on telElgraphcompauies who shall ch,oose to fake ,the benefit of its provisions" which impa,irs'the right of a state to tax the property or franchise of in the manner exercised by the state of in the present casei nor is such, a tax void as repugnant to section 8 of article 1 of the constitution,' which gives congress power to regulate commerce with foreign nations and among the several states. In Telegraph OJ. v. Texas, 105, U. S. 460, the supreme court held a' state statute, imposing a specific tax, on each message which it transmitted beyond the state,' or which a' public officer sends over its lines on business of the United States, was void so far as it was a tax on interstate business, or ,a tax by a state on the means employed by the Upited States to executeit.s constitutionaf powers. It will be observed that this out of the state, as well as a direct was a direct tax on each messa;ge, tax on messages sent by the government. In the present case, the tax is imposed upon the Elharl:)El of Gapital stock which represent the Every tax on ,the property property and franchise of the or franchise of a telegraph company may operate to increase the cost of messagessent, ,but that does not make such ,a tax invalid. In the case just referred to, Chief Justice WAITE, speaking for the court, says:
ATTORNEY GENERA.!ttiti.wlilS'1'Il:RN :'UNION TEL. CO.
"TlmWestern Union Telegraplt Co!l!pariy; having accepted therestricti6ns and (jbUgatipns of this. provision C<;lngrI)BS, occupiesiil Tex.as poSJitiQn of an instrument of and interstate commerce, and of a. governII,lent agent for the transmission of messages on public business. Its prop'erti in the state is subject to taxation the same as other property, and it may undoubtedly be taxed in a proper way on account of its occupation and its business. The precise question now presented is whether the power to tax its occupation can be exercised by placing a specific tax on each message sent out of the state, or sent by public officers on the business of the United States."
It was this last question that was determined in 'the negative. In the Delaware Railroad Tax Ckule, 18 WaU. 206, an act of the legislature of Delaware, imposing afux quite simUar to the one now complained of, was held not to conflict with the power of congress to regulate commerce. The c,ourt ill that case o b s e r v e s : '
"The state. mafimpose taxes on the corporation. as an entity eXisting under its laws, as well as upon. the capital stock of the corporation or its separate corporate property. And· the manner in which its value shall be assessed. and the rate of taxati:on, however arbitrary 6r capricious,are mere matters of legislative discretion. It is not for us to suggest in any case that a more equi. t onate oftaxation migbt be adopted than the one pretable mode of scribed by tbe legislature of the state; our only concern is with the validity of the tax; all else lies beyond the domain of our jurisdiction." The question of what constitutes a tax upon foreign or interstate commerce has frequently come before the supreme COUl,'t for adjudication, and I find no case which sustains the view taken by the defendant in this case. The question is carefully reviewed in ,the recent cases of Fargo v. Michigan, 121 U. S. 230, 7 Sup. Ct. 857, and Steam-Ship Co. v. Penrurylvania, 122 U.S. 326, 7 Sup. Ct. Rep. 1118. Section 40, c. 13, oOhe Public Statutes of Massachusetts, provides that every corporation em braced in the provision of flection 38 shall.paya tax upon its corporate at a valuation thereof equal to the aggregate value of the shares in its capital stock at a dertain rate determined as therein set forth, deducting in the case of railroads and telegraph companies whose lines extend beyond the limits ofthe commonwealth such portion the whole valuation of their capital stock as is proportional to the length of that part of their line lying without the commonwealth; and also an amount equal to the value as d.etermined by the tax commissioner of their real estate and machinery located and subject to local taxation within the commonwealth; in case of other corporations, an amount shall be deducted equal to the value of their real estate and machinery subject to local taxation wherever situate. The deductions in the case of porations generally, of all real estate and machinery wherever situate, and in the case of railroad and telegraph companies whose lines extend beyond the limits of the commonwealth, of only the real estate and machinery lying within the state, is a question of legislative discretion, and no valid ground has been suggested upon which this court for this reason has aright to declares tax so levied invalid,in whole or in part. I think a decree should be entered for the complainant, and that an
junction as prayed for should be granted, unless the amount taxed is paid by the defendant within 30 days from the entry of a decree in the cause. Decree for complainant.
and others v.
(Oircuit Oourt, D. Oolorado. De<;:ember 10, 1887.)
Negotiations were carried on between plaintiff and his brother and the president and secretary of defendant, which resulted in a contract, the terms of which were not, however, reduced to writing. As to these, plaintiff testified, and he was corroborated by his brother, that the ditch companies in which defendant was interested should issue increased new bonds to the al!'''''Jnt of *1,000,000, which they did, defendant to take new bonds for its old hold· ings.as well as for advances already Il;lade, and in payment of loans to be made, and the obligations of the ditch companies indcrs.ed to it by plaintiff should be surrendered. Defendant claimed that, until plaintiff had found customers for the excess of the new over the· old bonds, ·and effected the exchange of bonds of the new series for those of the old. and transferred to defendant one-half the capital stock of the ditch companies, it was to hold all its obligations and liens as collateral. The evidence showed that defendant represented to other parties making inquiries as to these bonds and enterprises that it knew of no "special dangers" or "risks" attending them. Entries made on the books of defendant showed the receipt of new bonds in payment and discharge of advances to the ditch companies; and in its annual statement for 1884, and in that for 1885, sworn to by its officers, are enumerated, under" Account of stocks, "etc., new boI1ds, not merely covering old holdings of bonds, but also defendant's other advances. From letters of defendant it further appeared that it expected to make advances to the amount of $150,000. Held, that the evidence sufficiently established a contract substantially as testified to by plaintiff; :tbat the notes and obligations to it indorsed by plaintiff had . been .paid and satisfied, and should be surrendered; that all securities held simply as collateral should be returned; and that complainants were entitled to an accountin,lt.
Bill to Establish a Contract, for its performance, and an accounting.
J. P. Brockway, Patterson &- Thomas, and J. L. Jerome, for complain-
ants. E. O. Wolcott,
Toll, and J. P. Vaile, for defendant.
BREWER, J. This is a bill filed by the complainants for the purpose, in brief, of establishing and enforcing a contract, and obtaining an acconnting. A large volume of testimony has been taken, very careful abstracts prepared ahd printed, and full argument, oral and written, presented. I have ·had the case under advisement for some months, and, from such examination, have been led to the. following conclusions: A brief statement of the relations between the parties prior to the time of the alleged contract will help to a clearer understanding of the question, and the weight to be given to the different items of testimony.