James Fargo v. William Hart

• Decision Date: 21 March 1904
• Docket Number: No. 154,154
• Citation: 193 U.S. 490,24 S.Ct. 498,48 L.Ed. 761
• Parties: JAMES C. FARGO, as President of the American Express Company, Appt. , v. WILLIAM H. HART, Auditor of State of the State of Indiana
• Court: U.S. Supreme Court

193 U.S. 490

24 S.Ct. 498

48 L.Ed. 761

JAMES C. FARGO, as President of the American Express Company, Appt.,

v WILLIAM H. HART, Auditor of State of the State of Indiana.

No. 154.

Argued February 24, 25, 1904.

Decided March 21, 1904.

Mr. Lewis Cass Ledyard for appellant.

[Argument of Counsel from pages 491-493 intentionally omitted] Messrs. Cassius C. Hadley, Charles W. Miller, L. G. Rothschild, and William C. Geake for appellee.

[Argument of Counsel from pages 493-495 intentionally omitted] Mr. Justice Holmes delivered the opinion of the court:

This is an appeal from a decree of the United States circuit court dismissing the plaintiff's bill and supplemental bills. The bill was brought by the president of the American Express Company, a joint stock company of New York, on behalf of himself and the other members of the company, to enjoin the auditor of the state of Indiana from certifying an assessment for 1898 to the auditor of the several counties of the state. Supplemental bills sought the like remedy in respect of the assessments for the following years through 1901. The ground of relief is that the assessments will result in unconstitutional interferences with commerce among the states and also are contrary to the 14th Amendment. The plaintiff's case may be stated in a few words. The American Express Company is engaged in commerce among the states, including Indiana. It has real estate of a market value of nearly two million dollars, which is outside of Indiana, and which it says is not used in its business, and fifteen million and a half dollars' worth of personal property in New York, as to which it says the same; over three million dollars' worth of real estate used in connection with the business, and about a million and a half dollars' worth of personal property used in the business, of which there was less than eight thousand dollars' worth in Indiana. It has paid the local taxes on this last. The total value of the property for 1898 was $22,059,055.35. The market value of what, for brevity, we may call its stock, was $21,600,000. The state board of tax commissioners has undertaken to tax the property of the company under the law which was upheld in American Exp. Co. v. Indiana, 165 U. S. 255, 41 L. ed. 707, 17 Sup. Ct. Rep. 991; Adams Exp. Co. v. OhioState Auditor, 165 U. S. 194, 41 L. ed. 683, 17 Sup. Ct. Rep. 305, 166 U. S. 185; 41 L. ed. 965, 17 Sup. Ct. Rep. 604; Adams Exp. Co. v. Kentucky, 166 U. S. 171, 41 L. ed. 960, 17 Sup. Ct. Rep. 527, by treating the whole business as a unit and assessing the company on a proportion of the total value of its property, determined by the ratio of the mileage in Indiana to the total mileage of the company, excluding its ocean mileage for foreign express business, which the company says should have been included. The company relies on the fact that it made a return to the board, setting forth in detail what its property was, where it was situated, and how used, and that the value and nature of the property was not disputed; and it contends that when these facts appeared the board was not at liberty to spread the whole value over the whole line equally, and tax by mileage. The auditor in his answer sets up that the said sum of fifteen and a half million dollars in securities is used by the company as a part of the necessary capital of its business, and denies that the board assesses personal property not used in connection with its business. Thus, he admits, by implication, that the above sum did enter into the assessment made, and this would be obvious unless we should assume the intended tax to be wholly arbitrary, as the assessment was at the rate of $450 a mile for 1,798 and a fraction miles, amounting to $809,253, as against less than eight thousand dollars' worth of tangible property in the state. There are some differences of detail between the state and the company as to the precise value of the stock, etc. But the foregoing facts present the general question.

The contention of the company in its extreme form is that the state had no right to tax it anything for the years when its stock was of less market value than its property, because that ratio showed that the whole value of the company was in its tangible assets, and that the intangible property spoken of in the Adams Express Company Case was nothing. It says that in any year that property was so small as to warrant only a nominal tax. We lay this contention on one side. It was admitted at the hearing before the board of tax commissioners that an appreciable sum properly might be assessed on the mileage basis, and therefore the board was warranted in assuming the fact. It was admitted at the argument before this court that the low market value of the stock was due in part to the ignorance of the public as to the assets of the company. On this concession the market value of the stock was not a test of the value of the business. The statement is confirmed by the continued rise in the stock since, up to $225 in April, 1902. And apart from these admissions the board well might have hesitated to believe that the company was carrying on a business, which it gave no signs of intending to stop, at a loss, and was paying its regular dividends out of investments alone. We lay on one side also the question of ocean mileage. Without dwelling on the sudden change in the returns, which added nearly 130,000 miles in 1898, with comparatively slight explanation, or the admitted differences between the ocean and land carriage, we cannot say that the tribunal, having the duty and sole jurisdiction to find the facts, exceeded its powers in not allowing the item.

We come, then, to the real question of the case: whether, the tax provided for by the statute being a tax on property, it sufficiently appears that the board took into account property which it had no right to take into account in fixing the assessment at the large sum which we have mentioned. We already have stated reasons for assuming that the personal property in New York did enter into the valuation. We may add that it appears by a stipulation as to facts, that 'the minutes of said state board of tax commissioners' are in evidence. This means the complete minutes. It must be assumed that the minutes show all that took place in the proceedings, and therefore that we have before us all the evidence that was put in as well as a report of what was said. There was no indication of dispute concerning the amount, value, and place of the company's personal property. The protests of the company alleged that there was no dispute as to the facts. If the company had been mistaken common fairness required that it should be informed and allowed to give further evidence of the undoubted truth. The ground taken before the board, and insisted on in argument before us, was that the property ought to enter into the valuation, because, wherever situated, it was used in the business; if not otherwise, at least as giving the credit necessary for carrying the business on. We shall assume that the question before us is narrowed to whether that ground can be maintained. The pleadings and proceedings leave no alternative open, and no other could be pressed consistently with the candor to be expected from the officers of a state, in face of a constitutional question and dealing with great affairs. For present purposes it does not matter whether the sum taken for division on a mileage proportion was reached by taking the value of the stock or the value of the tangible assets of the company. For if the former was the starting point it appears from what we have said that the tangible assets gave the stock its value. The use of the value either of total stock or total assets is only as a means of getting at the true cash value of property within the state. Western U. Teleg. Co. v. Taggart, 163 U. S. 1, 26, 27; 41 L. ed. 49, 58, 59, 16 Sup. Ct. Rep. 1054; Pullman's Palace Car Co. v. Pennsylvania, 141 U. S. 18, 25, 35 L. ed. 613, 617, 3 Inters. Com. Rep. 595, 11 Sup. Ct. Rep. 876.

The general principles to be applied are settled. A state cannot tax the privilege of carrying on commerce among the states. Neither can it tax property outside of its jurisdiction belonging to persons domiciled elsewhere. On the other hand, it can tax property permanently within its jurisdiction although belonging to persons domiciled elsewhere and used in commerce among the states. And when that property is part of a system and has its actual uses only in connection with other parts of the system, that fact may be considered by the state in taxing, even though the other parts of the system are outside of ...