Branson v. Bush

Citation64 L.Ed. 215,251 U.S. 182,40 S.Ct. 113
Decision Date22 December 1919
Docket NumberNo. 82,82
PartiesBRANSON, Sheriff and Collector, et al. v. BUSH
CourtUnited States Supreme Court

Messrs. George B. Rose, W. E. Hemingway, and J. F. Loughborough, all of Little Rock, Ark., for appellants.

Mr. Thomas B. Pryor, of Ft. Smith, Ark., for appellee.

Mr. Justice CLARKE delivered the opinion of the Court.

By act of the General Assembly the state of Arkansas created 'Crawford County Road Improvement District No. 2,' a body corporate, and prescribed its boundaries. Special & Private Acts of Arkansas 1911, p. 642.

To pay the cost of the road improvement contemplated the act provided that it should be made a charge upon all of the real property, railroads and tramroads in the district. Bonds were sold and the road completed before this suit was commenced to enjoin the collection of taxes charged against the property of the railway company, of which the appellee, hereinafter designated the company, was receiver. The tax objected to was imposed upon the assessed value of the main track, side tracks, rolling stock, buildings and material of the company apportioned to the road district under a state law for the valuation of railroad property, and in the bill it is alleged to be invalid because the assessment conflicts with many provisions of the Constitutions of the United States and of Arkansas. The rate was the same for all real property in the district.

The District Court permanently enjoined the tax to the extent that it was imposed on personal property—the rolling stock and materials of the company. From this part of the decree no appeal was taken and thereafter all question as to the invalidity of the assessment because including rolling stock and materials disappeared from the case. But, for want of equity, the bill was dismissed so far as applicable to the real estate 'designated in the bill as main track, side track and buildings.' On appeal by the company from this part of the decree, the Circuit Court of Appeals reversed the decree of the District Court and enjoined the collection of the tax on the real estate on two grounds:

(1) Because the including of the franchise and other intangible property of the company in the assessment results in 'a higher rate of taxation' on the property of the railway company than on the other property in the district, and

(2) Because the evidence fails to show that the company would derive any benefit from the improvement of the road.

In this court the plaintiffs in error, hereinafter referred to as the road district, assign as errors these two holdings of the Circuit Court of Appeals, and we shall consider them in the order stated.

All property of the railway company in the state was assessed by a state tax commission under an act, the validity of which is not assailed, providing:

'The franchises (other than the right to be a corporation) of all railroads * * * are declared to be property for the purpose of taxation and the value of such franchises shall be considered by the assessing officers when assessing the property of such corporations.' Acts of Arkansas 1911, p. 233, § 2.

The act also required the commission to 'determine the total value of the entire property of the corporation, tangible and intangible'; that the buildings and side tracks should be assessed as real estate in the town or district where located, but that the main track, also to be assessed as real estate, should be apportioned among the several towns and districts through which the road ran according to the 'actual mileage in each town or district.'

The Circuit Court of Appeals did not hold either the railroad valuation or the district road improvement law unconstitutional, both being types of laws often upheld by this court (State Railroad Tax Cases, 92 U. S. 575, 23 L. Ed. 663, Cleveland, etc., R. R. Co. v. Backus, 154 U. S. 439, 14 Sup. Ct. 1122, 38 L. Ed. 1041, and Houck v. Little River Drainage District, 239 U. S. 254, 36 Sup. Ct. 58, 60 L. Ed. 266), but the first ground of its decision was, only, that the assessment of the main track under the former law, as applied to the case of taxation by benefits provided for by the latter, resulted in unequal taxation to an extent amounting to a denial of the equal protection of the laws.

The court was carried to its conclusion by process: The act creating the road district, and the general law applicable to local assessments in proportion to benefits, both required that only real estate should be assessed to pay for the improvement here involved; only the real estate of the other property owners of the district was assessed, and therefore when the franchises, personalty, of the railroad company were 'considered' in making the assessment complained of, the company was taxed a 'higher rate,' a greater amount, than other property owners and by such discrimination was denied the equal protection of the laws.

It is argued by the road district that this conclusion is erroneous, for the reasons following:

The assessment law, which we have quoted, provides that the franchises of railroad companies ('other than the right to be a corporation') 'shall be considered' by officials when assessing their property.

It is to be noted that this law does not provide for the assessment of the franchises of railroad companies separately as personal, or intangible property, as the laws of some states require, but only declares that they are 'property' which 'shall be considered by assessing officers when assessing the property of such corporations' and they are not valued separately in the assessment complained of, as it is itemized in the bill of complaint.

It is not easy to define just what is meant by the 'franchise' of a railroad company 'other than the right to be a corporation' and the record does not attempt a definition. Morgan v. Louisiana, 93 U. S. 217, 223, 23 L. Ed. 860. The record is also silent as to what, if any, value was placed upon the franchises of the company here involved by the state tax commission, and as to what extent, if at all, they were 'considered' in arriving at the assessment objected to, and therefore, it is contended, that the conclusion of the Circuit Court of Appeals that personal property value was included in the assessment of the real estate of the district has no foundation on which to rest, other than the assumption that the tax commission conformed to the law and 'considered' the franchises when assessing the real estate and that this necessarily resulted, in fact, if not in form, in such inclusion—an unusually meager basis surely for invalidating a tax of the familiar character of this before us.

If, however, the distinction sometimes taken between the 'essential properties of corporate existence' and the franchises of a corporation (Memphis, etc., R. R. Co. v. Commissioner, 112 U. S. 609, 619, 5 Sup. Ct. 299, 28 L. Ed. 837) be considered substantial enough to be of practical value, and if it be assumed that the distinction was applied by the state commission in making the assessment here involved, this would result, not in adding personal property value to the value of the real estate of the company in the district, but simply in determining what the value of the real property was—its right of way, tracks and buildings having regard to the use which it made of it as an instrumentality for earning money in the conduct of railroad operations. This at most is no more than giving to the real property a value greater as a part of a railroad unit and a going concern than it would have if considered only as a quantity of land, buildings and tracks.

This is the method of assessing railroad property often approved by this court, specifically in Cleveland, etc., R. R. Co. v. Backus, 154 U. S. 439, 445, 14 Sup. Ct. 1122, 1124 (38 L. Ed. 1041), saying:

'The rule of property taxation is that the value of the property is the basis of taxation. It does not mean a tax upon the earnings which the property makes, nor for the privilege of using the property, but rests solely upon the value. But the value of property results from the use to which it is put and varies with the profitableness of that use, present and prospective, actual and anticipated. There is no pecuniary value outside of...

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