taxes.' 'have been paid in counties to be affected by the injunction thus'dl'a:wn, and another amendment to the bill, with affidavit, is 1lled,shoWing such payment, the demurrer to the amended bill will be overruled; otherwise the bill will be dismissed.
'EXPRESS CO. v. POE, Auditor of State of Ohio, et at (Oircuit Court, S. D. Ohio, E. D. No. 637.
April 23, 1894.)
The, "NiQilolll Law" (Rev. St. Ohio, § 2778a), which provides that the of the property of express companies doing business within be based upon the market vaiue of their capital stock, viothe· state, lates Col1st,Ohio, art. 12, § 2,which requires that the taxation of property a uniform rule;" . for the value of the capital stock includes shall good Will: an!l other intangible elements of value, which are not taxed as against and other corporations.
This is a suit in equity to enjoin the assessment of' a tax, brought by theAdams Express Company, a joint·stock company under the in the name of its 'president, Henry Sanford, laws of against the'state auditor, attorney general, and state treasurer of Ohio. It now comes on for hearing on demurrer to the bill, and on motion bycompJainant for preliminary injunction. .
The mainiqtieStl\>ns at issUe are the same as those considered in the opinion just filed· in· tile case of the Western Union Telegraph Company against the same defendants (61 Fed. 449). The bill avers tilat the complainant pre· with tile state aUditor a statement, for the year 1893, of the pared amount of and of its gross!'eceipts, in each county in the state of Ohio; and the aggregate value of its shares, together with a detailed report of all the property owned by the complainant in the state of Ohio, and wbere located, and the amount at which the same was assessed for taxation;, t4at tiledefendanti!\, .as a board of appraisers" under the Nichols law fixed, in accordance with its requirements, the value of the property of the complainant within the 'state of Ohio at the sum of $460,033.08; that they threaten to' certify the sum to the auditors of the various counties, as directed by the state, after apportioning the amount in the ratio of the gross receipts of complainant from ,its business in each of the counties to the entire gross receipts in the state; that, unless restrained by an order of this court, the defendants will make such certification to the auditors of 67 counties in which complainant does business, who will at· once, as required by the said pretended .laws, certify the same to the respective treasurers of each of ·said counties for collection, where it will be necessary, unless the board is restrained, tqbring suits to enjoin the collection of the assessment; that the rate of taxation in Ohio for 1893 varies, according to the county, from 2% to 3 per cent., so that the aggregate assessment against the complainant upon the illegal and excessive appraisement will amount to between $12,000' and $14,000, and. in one ormol' cC)unties will exceed $2,000; that the complainant owns no Une of .railroad in the !3tate of Ohio, and that it conducts its business on many Hnes of rallroad under contract wlth owners of said railroads; that it owns no i'ealestate in said state,except such as is used in stabling its horses owned lind used by it in the collection and distribution of goods, wares, and merchandise, and that its personal property in said state cousists entirely of office furniture and tools, horses, and wagons: thll" the total value of its personal propertt in the state of Ohio does not ex.ceell the sum of $53,500; that it has paid all taxes due upon its real estate within the state to date; that the Nichols law is tlnconstitutional and void, in this:-
ADAMS EXPRESS CO.
that it does not provIde a method for the taxation of property ac('ori'tinc: to the true value In money, but is really an attempt to enforce agaInst telegraph, telephone, and express companies the payment of a tax for the privilege of doIng business in said state, by placing a fictitious value upon their property, not authorized by the constitution of the state of Ohio; that the scheme of taxation set forth In saId alleged law professing to tax property in the state of Ohio does not do so, because it directs the board of appraisers, in ascertaining the value of the property of express companIes in Ohio, to be "guided by," and to "determine the value" of the companies' property in said state by, the value of the companIes' capItal stock; that the value of the companies' capital stock Is fixed and determined by the nature, extent, and uses of their property, not only In OhIo, but in many other states of the United States, and by the skill, diligence, fidelity, and success with which their business is conducted in all these states; that complainant employs many thousands of men, who are constantly engaged as messengers in carrying goods, wares, and merchandise from one part of the country to another, and otherwise, and that its income is largely the result of their efforts; that it owns valuable securities of other companies and holds valuable contracts and business arrangements with other corporations, and that all of these, wIth the good will which It has earned in the course of more than 50 years of servIce to the pUblic in said business, go to make up the value of the shares of its capItal; that the whole number of shares of said company is 120,000, and the market value of said shares, of the par value of $100, each, has ranged from $140 to $150, a price very much above the actual value of all the property of saId company; that the law is a tax upon interstate commerce; that the method of taxation, If enforced agaInst it, will destroy the business of complainant in Ohio, and compel it to abandon the said state, to its great and irreparable damage. The prayer of the bill is that a multiplicity of suits may be avoided, and the Injury threatened, as above set forth, may be averted, by a preliminary injunction, and that, after hearing, a final injunction shall be granted against the defendants from certifying the appraisements under the Nichols law to the county auditors. Subsequently, an amendment to the bill was filed, averring the payment of taxes upon the retll and personal property of the company in each county in Ohio. An affidavit was filed by the defendants, showing the method by which the appraIsement of the defendants was reached. The affidavit shows that the board had the following facts before it: That the number of shares of the capital stock of the Adams Express Company was 120,000. That the market value was from $140 to $150 per share, making the actual amount of 120,000 shares, at $140 per share, $16,800,000. That the total value of the- personal property in Ohio of the Adams Express Company, consisting 4>f office furniture, horses, and wagons, was $53,080.74, and that the gross receipts of the business done by the company within the state of Ohio for the year ending the lst of May, 1893, was $175,034. That the total value of the real estate of the Adams Express Company everywhere was 272.47, and the total value of the personal property of the company was $1,034,481.43. That in the statement of the Adams Express Company were included reports from 363 offices. That from 2 of these offices the personal property was returned of the value of less than one dollar; from 72 ()If the offices the personal property in etlch instance was returned at a value of one dollar; from 51 offices the value of the personal property was returned of over one dollar and under two dollars. That the express company made no returns of safes, pouches, or other personal property used on the railroad lines in the state in the transaction of its business. The affidavit shows, and so do the minutes of the board, that "in arriving at the value of the property of these express companies taxable in OhIo the· board did not follow any fixed rule, except the rule that property in OhIo Is ordinarIly taxed at no more than two-thirds of its actual value, and the law governing this board. The board considered the facts, already stated, set out in the returns and supplementary statements, and also other facts In said returns, and In the testimony of the authorized agents of the companIes who uppeared before the board. For purposes of comparison, the board examined the gross receipts returned by these companies In preceding years. Taking all the
Information the board' had or could secure, the value ot the capital stock otitlieoompany, its gross receipts.' Within Ohio. the return Of personal property made, and the character thereof, and evident under-valuation and omission therein, the number of ofiices, the amount of business done, the nature and value of the property and capital required to carryon such business, 'and other evidence and information, the board in each instanc ascertained What it cOnsidered the fair proportion of the property of the company employed by it in Ohio, and fixed the value' of the property of Such· company situate and taxable therein, being guided, in determining the value of the property, by the value of the entire capital stock, and otllel' eVidence and information before the board."
Ramsey, Maxwell & Ramsey, for complainant. J. K. I.lichards, Atty. Gen., and Thos. McDougall, for respondents. TAFT, Circuit Judge (after stating the facts as above). The validity of the Nichols law has been considered in the opinion-filed at the Same time with. this-in the case of the Western Union Telegraph Company against the same defendants (61 Fed. 449), and all the questions of law therein considered are raised by the bill and demurrer and the moti(jn, for. an injunction in this case. The questionof illrisdictionQyreasOn of the amount involved is also the same . as ,in the Western Union Telegraph Company Case. It is admitted that the difference between the aggregate amount of the certifications to the county auditors about to be made by the defendants·· against the Adams Express Company under the Nichols law, and the amount which that company will pay under previous laws, if the Nichols law is finally held invalid, amounts to $241,918.34, ",hich difference, at the rate of taxation prevailing in Ohio, tax of from $6,0.00 to $7,000.. It is true that in no single county,·does this tax difference equal or exceed $2,000; but, as already, held in the Western Union Telegraph Company Case, I do the difference in anyone county is the measure of the amount iil in tbis action. There is very little to add to what has been said in the telegraph opinion. The lack of uniformity in the mode of assessment under the Nichols law with that generally prevailing in Ohio in respect to property of individuals and other corporations is more marked in the case of this complainant than it was in the case of the telegraph company. There is a suggestion in the report of the assessors that the express com" pany did 'not return all its property, because its return did not include the' safes and pouches which must be used in its business. But it is not claimed, and could not be, that the failure to return the safes is ancexp.lanation of the difference between $53,000, the amount returned 1?yfhe company as the value of its property in Ohio, and the $460,000 at which the board has assessed the value of that property. ,The . earning capacity of an express company, which largely deffi:rmines the value of the shares of its capital stock, is even than the earning. capacity of a telegraph company upon itlil good will, skill and honesty of its ,employes, and upon its franclQ,ses:and other rights and privileges not property. A very of the revenues of an express company is the business arrangements which it has with railroad companies, by vir-
ADAMS :E;XPRESS 00. ". POE.
tue of which, for a lump sum, fixed annual payments, or percentage of gross receipts, the railroad company permits a particular express company to use its cars for the transportation of its merchandise, and to use its stations, depots, and employes for the transaction of its local business. It is very doubtful, in my mind, whether such a business arrangement is personal property, to be returned for taxation under the laws of Ohio. It certainly is not real estate, because it gives an express company no interest in the land. It is intangible. The making of such a contract probably involves the personal character, so to speak, of the contracting express company, its good will, and its reputation for honesty and promptness, so that a contract made with it would be inalienable by it. It is certain that express companies have never been required to make returns of such contracts as personal property, and the definition of personal property, as given in section 2730, does not include it, for personal property, as there defined, is as follows:
"The term 'personal property' shall be held to mean and include, first, every tangible thing being the subject of ownership, whether animate or inanimate, other than money, and not forming part of any parcel of rell1 property, as hereinbefore defined; second, the capital stock, undivided profits, and all other means not forming part of the capital stock, of every company, whether incorporated or unincorporated, and every share, portion, or interest in such stock, profits, or means, by whatsoever name the same may be designated, inclusive of every share or portion, right, or interest, either legal or equitable, in and to every ship, vessel, or boat, of whatsoever name or description, used or designed to be used either exclusively or partially in navigating any of the waters within or bordering on this state, whether such ship, vessel, or boat shall be within the jurisdiction of this state or elsewhere, and whether the same shll1l have been enrolled, registered, or licensed at any collector's office, or within any collection district in this state or not; third, the money loaned on pledge or mortgage of real estate, although a deed or other instrument may have been given for the same, if between the parties the same is considered as security merely."
Such contracts or business arrangements would seem to be more nearly included as "credits," which are defined by the same section as follows:
"The term 'credits' shall be held to mean the excess of the sum of all legal daims and demands, whether for money or other valuable thing, or for labor or service due or to become due to the person liable to pay taxes thereon, including deposits in banks or with persons in or out of this state, other than such as are held to be money, as hereinbefore defined, when added together (estimating every such claim or demand at its true value in money), over and above the sum of legal bona fide debts owing by such person."
And yet it is doubtful whether the right to enforce a contract unexecuted on either side could be said to be a legal demand for services due or to become due. However this may be, even if the value of such contracts were taxable as property in Ohio, there still would remain the good will of the business, the skill and experience of the officers, the discipline among, and honesty of, the employes of the company, which contribute so largely to the earnings, and yet are not taxable property in Ohio. The suggestion is made that the return of the company is an undervaluation, because no personal property, or a very small amount, is returned from any offices of the company in Ohio. I do not know why
that shOUld.in,dicate undervaltilitibn., because it plainly grows out of the fact' :mit,s.t the many small stations along the lines of the railroad upon which: !the express companies operate, the express company uses the ..J1Jture and the railroad and no own. There was .In this case no mileage baSIS for the of the capital stock, and the board' of .appraisers are unable' $8.tisfactorily to explain the basis upon which they affixed, t6 'Property returned by the express company as worth $53,000, an.·adtUtional ·. vallie of over. $'4:00,000, except that in reaching additional' value they considered the gross receipts· of the company inOliioi .and the market value· of its entire capital stock, and and information. This only confirms the conclusion the case ofthe telegraph company, that the board conreached strued· law to mean. that there should be apportioned to the of Ohio for taxation, as property within the .state, a .fair share of the aggregate market value of the capital stock of the company. It is very true, as said' by the sUpreme court in the case of Express Co. v. Seibert, 142 U. S. 339, 12 Sup. Ct. 250, that the tangible value of express companies is in a very small ratio to the protection which they receive from the government of the state, and therefore that it is entirely just that their burdens of taxation should not be proportioned to the visible tangible property upon which they may be taxed. But the difficulty in Ohio is that, under the constitution, the property of the corporations and individuals must be taxed by a uniform rule, and the inequalities of taxation produced b;y the fact that large ea,rnings are' made by corporations with small tangible property cannot be obviated by affixing to the property of such corporations a fictitious value, plainly not based on the true value of it in money. The tax must be imposed on something other than property. The same order of injunction will be made in this case which was directed in the case of the telegraph company. As, under the old law, the taxes paid by the express companies were proportioned to the gross receipts in each county, and the same method of distribution ,is prescribed under the Nichols law, it is apparent that the complainal;J.t will not have to :pay, under the old law, any more taxes in' any particular county than it would have to pay under the Nichols law. For this reason, the order of injunction will cover the certifications to. all the counties, and will be made conditional on the complainant's paying the taxes on its gross receipts from. business done vvithin the state of Ohio in each county for the year ending May 1, 1893, with interest and penalty, when an amendment to the b1ll showing such payDlents has been filed, the demurrer will be overruled; otherwise, and unless this amendment is filed within 10 the bill will be dismissed.
tJNlTEDSTATES EXP. CO. V. POE.
UNITED STATES EXP. CO. v. POE, AUditor of State·of Ohio, et al. AMERICAN EXP. CO. v. SAME. (Circuit Court, S. D. Ohio, E. D. Nos. 675 and 674FEDERAL COURTs-JURISDICTIONAL AMOUNT-TAXATION.
In a suit In the federal court to enjoin an assessment under a state law alleged to be unconstitutional, a preliminary injunction will be denied where It appears, by uncontradicted affidavits, that the increased tax imposed by reason of such illegal assessment is less than $2,000, though the averments of the bill are sufficient to give the court juriSdiction.
In Equity. On demurrer. Bills by the United States Express Company against Ebenezer W. Poe, auditor, John K.Richards, attorney general, and William T. Cope, treasurer, of the state of Ohio, and by the American Express Company against the same defendants. Bills dismissed. Ramsey, Maxwell & Ramsey, for complainants. J. K. Richards, Atty. Gen., and Thos. McDougall, for respondents. TAFT, Circuit Judge. These are suits in equity brought to enjoin the collection of taxes under the so-called "Nichols Law" of Ohio, and on the merits present much the same questions which have already been decided in the cases of the Western Union Telegraph Company and the Adams Express Company against the same defendants. 61 Fed. 449, 470. In these cases, however, it clearly appears by affidavit that the difference between the amounts upon which the complainl,lnts must pay taxes under the laws in force, if the Nichols law is invalid, and the amounts upon which they are required to pay by the assessments of the defendants as a board of appraisers under the Nichols law, is in the case of the American Express Company but $23,000, and in the case of the United States Express Company but $18,082. The average rate of taxation in Ohio, as shown by the affidavits, is from 2i to 3 per cent. Such a percentage of this difference would make the whole amount in eontroversy in each case less than $2,000. It is true that the averments of the bill are sufficient to give the court jurisdiction, but the affidavits show (and there are no counter affidavits) the facts to be as above stated. While, therefore, I cannot sustain the demurrers to the bills, on the ground that, on their faces, they show a lack of the· jurisdictional amount in controversy, I can refuse the preliminary injunction on that ground. I can dismiss the bills on the ground that they do not show a payment of the taxes due under old section 2778, Rev. St. Ohio, which would be in force if the Nichols law is unconstitutional, and can refuse to permit an amendment such as I have permitted in the Western Union Telegraph Company and Adams Express Company cases. The demurrers in this case to the bills will, therefore, be sustained, and the bills dismissed.