Detroit Citizens' St. R. Co. v. Common Council of City of Detroit

• Decision Date: 12 February 1901
• Citation: 85 N.W. 96,125 Mich. 673
• Parties: DETROIT CITIZENS' ST. RY. CO. v. COMMON COUNCIL OF CITY OF DETROIT.
• Court: Michigan Supreme Court

85 N.W. 96

125 Mich. 673

DETROIT CITIZENS' ST. RY. CO. v. COMMON COUNCIL OF CITY OF DETROIT.

Supreme Court of Michigan

February 12, 1901

Certiorari to circuit court, Wayne county; William L. Carpenter, George S. Hosmer, Byron S. Waite, Joseph W. Donovan, and Morse Rohnert, Judges.

Petition for mandamus by the Detroit Citizens' Street-Railway Company against the common council of the city of Detroit. From an order denying the writ, relator brings certiorari. Affirmed.

Brennan, Donnelly & Van De Mark (Henry M Duffield, H. H. Hatch, and John J. Spped, of counsel), for appellant.

Timothy E. Tarsney (Allen B. Morse and George E. Nichols, of counsel), for respondent.

HOOKER J.

The relator is a corporation organized and operating a street-railway trolley line in the city of Detroit. Its railway extends through several wards of the city, and into a township outside of the city. The assessment of values of property for taxation in Detroit is made by a city board called the 'Board of Assessors,' its action being subject to review by the common council. This board assessed the relator's property for the year 1900 at something over $5,000,000, its previous assessment having been $800,000 for the year 1898, and $1,500,000 for the year 1899, and the council, professing to act as a board of review, subsequently confirmed the assessment. On May 14, 1900, the relator filed a petition for mandamus in the circuit court, in which it prayed that the respondent, the common council, be required to strike the assessment from the rolls, or, in the alternative, that it be required to reconvene as a board of review, and strike from said assessment certain sums alleged to represent the value placed upon the franchises of the relator, and to place upon the roll the personal property of the petitioner at the actual cash value of its tangible personal property subject to taxation. On the return of an order to show cause issue was joined upon several questions of fact, and, after hearing the testimony, that court, sitting en banc, denied the relief prayed, and the relator has brought the case here.

The circuit court filed written findings of fact, based upon the issues, and an opinion discussing said findings and the law applicable to the case.

Four objections only, made by relator's protest filed with board of assessors, were relied upon in the circuit court, as appears from the opinion: '(1) That the valuation placed on relator's taxable personal property greatly exceeds its true cash value; (2) that there was illegally included in said valuation several million dollars on account of franchises; (3) that no separation was made on the assessment roll of the valuation placed on the franchises and the valuation placed on the tangible personal property of relator; (4) that the property acquired by relator from the Grand River Street-Railway Company is taxable, by virtue of a contract with the city, at one per cent. on its gross earnings, and is not otherwise subject to taxation for city purposes.'

The circuit court omitted to determine the first, i. e. whether the valuation exceeded the cash value of the property, upon the ground that a court can only assume to control the judgment of an assessing officer in fixing values where said officer has acted fraudulently. The disposition of the second is shown by the following question: 'In fixing the valuation of the personal property of the petitioner, did the board of assessors take into consideration and include the franchises of petitioners, and easements in the nature of franchises, in the streets of Detroit, acquired by petitioner from the Detroit City Railway, and owned and enjoyed by petitioner, as alleged in paragraph 8 of the petition?' to which the court answered, 'Yes; they took into consideration the franchise in the streets of Detroit, as stated in the opinion.' Referring to the opinion for a more complete answer, we find it stated that 'the franchise which was taken into consideration in valuing relator's personal property was its right to construct, maintain, and operate street railways in the streets of Detroit, and to collect fares from passengers carried thereon.' It appears to be conceded that there was no separation upon the roll of the valuation placed upon the franchises from that placed upon the tangible personal property, and that the property was assessed at some $2,000,000 more than the value of the track, rolling stock, etc., disassociated from the easement in the highway and its attendant privileges.

For the purpose of the discussion of the question before us, we will treat franchises as of three classes: First, the right to organize and exist as a corporation; second, the right to act generally as a corporation; and, third, the special privileges granted to it which are not possessed by the individual under general laws. See Chicago Municipal Gaslight & Fuel Co. v. Town of Lake, 130 Ill. 42, 43, 22 N.E. 616.

The first of these is enjoyed by all corporations legally formed, and also by all assuming to be corporations through user. This right to exist as a corporation is not transferable, and therefore cannot be said to have a cash value, in the sense of our statute. Joy v. Road Co., 11 Mich. 164. Cash value and actual value are said to have the same meaning, viz. 'the amount at which property would be estimated if taken in payment of a liquidated demand due from a solvent debtor.' Weltz, Assessm. � 130, and cases cited.

The term is fixed, however, by our statute (Comp. Laws, � 3850), which provides: 'The words 'cash value,' whenever used in this act, shall be held to mean the usual selling price at the place where the property to which the term is applied shall be at the time of assessment, being the price which could be obtained therefor at private sale, and not at forced or auction sale.' Apparently the intention was not to tax property having no cash value. If it were transferable, it would seldom be worth more than a nominal price, by reason of the facility with which such corporations may be organized under our general laws, which is the only way that private corporations can be created in Michigan. Const. art. 15, � 1.

Again, franchises of the second class are incident to all corporations, and are manifestly of no more value than the right to exist; for they naturally and impliedly go with it, and are not transferable. Every corporation has by implication authority to acquire and dispose of property, and to carry on business as a private person would do, for the purpose for which the corporation is organized. Joy v. Road Co., supra; Stone v. Trust Co., 116 U.S. 307, 6 S.Ct. 334, 388, 1191, 29 L.Ed. 636. The third class consists of exceptional privileges--usually, if not always, connected with property--which the citizens generally do not enjoy, and these are frequently of much value. To apply what has been said to the relator: Any number of street-railway companies might be organized under the statute, and they would have the right to exist as lawfully constituted corporations, with the corporate capacity to build and operate street railways anywhere in the state. But the right to build would have to be acquired. Until such a corporation should be able to obtain an easement in some highway,--which the statute does not, of itself, effectuate,--its privileges would be of little, if any, value. But when it should have acquired possession of an easement in a designated highway, for the purposes of a street railway, and constructed and put in operation a railway thereon, the easement and railroad would constitute property.

It seems not to have been the policy of the state to place any price or tax upon the right to exist or act as a corporation until recently. Now a franchise tax is exacted from all newly formed domestic corporations, as well as those of foreign states and countries, which choose to do business within the state. This is in no sense a tax upon property. It is exacted but once, viz. when the company is organized or enters the state to do business, and, in short, is a condition upon which it is permitted to be and to act. The price of these privileges is proportionate to the capital employed. Whether the state might treat these franchises as property, and provide for their assessment on an ad valorem basis, we need not inquire. It has not been done, and there seems to be little inducement for such action, because of the trifling value of the abstract right of corporate existence.

Recurring to the third class, it is noticeable and suggestive that the state has not, in express and certain language, imposed a tax upon franchises as property upon an ad valorem basis. We are of the opinion that the reason is the there is no occasion for it. A fundamental idea in our organic law is equality of taxation. It requires uniformity of method, and prescribes the basis upon which property shall be taxed, viz. 'its cash value.' There is no more excuse for ascribing a fictitious value to property, whether tangible or intangible, than there is justice in undervaluing or omitting it from the tax roll.

We have attempted to show that special privileges are usually of little more than nominal value, except in connection with tangible property, which makes it possible for the owner--who may be a corporation or a natural person--to avail himself of them. Why, then, should they be taxed in the abstract, and when the owner can neither use them nor sell them? In California v. California Pac. R. Co., 127 U.S. 1, 8 S.Ct. 1073, 32 L.Ed. 150, it is said: 'The taxation of a corporate franchise merely as such, unless pursuant to a stipulation in the original charter of the company, is the exercise of an authority somewhat arbitrary in its character. It has no...