Texas & P. Ry. Co. v. City of El Paso

• Decision Date: 24 July 1935
• Docket Number: No. 6435.,6435.
• Citation: 85 S.W.2d 245
• Parties: TEXAS & P. RY. CO. v. CITY OF EL PASO.
• Court: Texas Supreme Court

Page 245

85 S.W.2d 245

TEXAS & P. RY. CO. v. CITY OF EL PASO.

No. 6435.

Supreme Court of Texas.

July 24, 1935.

Error to Court of Civil Appeals of Eighth Supreme Judicial District.

Suit by the City of El Paso against the Texas & Pacific Railway Company. Judgment for defendant was reversed and rendered by the Court of Civil Appeals [53 S.W.(2d) 821], and defendant brings error.

Judgment of the Court of Civil Appeals reversed, and judgment of the District Court affirmed.

S. N. Russell, of El Paso, and T. D. Gresham, R. S. Shapard, and Touchstone, Wight, Gormley & Price, all of Dallas, for plaintiff in error.

J. H. McBroom, Steve Lattner, and Frank B. Clayton, all of El Paso, for defendant in error.

Terry, Cavin & Mills, of Galveston, amicus curiæ.

SHARP, Justice.

The city of El Paso filed this suit against the Texas & Pacific Railway Company to recover certain balances of taxes, penalties, and interest, claimed to be due by the railway company for the years 1925, 1926, 1927, and 1928, aggregating the sum of $16,354.09. The trial was before the court without a jury, and judgment was entered in favor of the railway company. An appeal was taken to the Court of Civil Appeals at El Paso, and the judgment of the trial court was reversed, and judgment rendered in favor of the city against the railway company for the full amount sued for, with interest thereon from the date of judgment. 53 S.W.(2d) 821. A writ of error was granted to review the judgment of the Court of Civil Appeals.

The city of El Paso contends that that portion of a public street within an incorporated city occupied by the tracks of a railroad company, and used by such railroad for the operation of its trains, constitutes part of the railroad's right of way and roadbed, within the meaning of article 7168, Vernon's Annotated Texas Civil Statutes, and is taxable as such by an incorporated city.

On the other hand, the railway company contends that the Court of Civil Appeals erred in holding contrary to the conclusion of the trial court, that the special franchises sought to be taxed herein are taxable by the city of El Paso as the right of way under subdivision 2 of article 7168. It is also contended that the city undertook to tax the easements granted the railroad, which was illegal; that the easements, if taxable at all, are intangible assets, which can only be taxed by the state under the Intangible Assets Law; that said tax is discriminatory, because the public generally is not taxed for the use of streets by automobiles, trucks, etc.; and that the valuation placed upon the said right of way was arbitrary and excessive.

The railway company operates under a federal charter, and is engaged in interstate commerce. The city of El Paso, by virtue of certain ordinances, granted to the railway company the privilege of building and using its tracks in the public streets. The ordinances refer to this right as the "railroad's right of way." These rights have been enjoyed by the railway company for many years. There was no dispute about the rendition and valuation of the physical or tangible property of the railway company. The company rendered its property during the years in controversy for a total assessed valuation of $477,480. This amount included the ties, rails, etc., used in its tracks or right of way. Independent of the right of way, or easement, or franchise, that was the value agreed upon, and taxes were paid upon this amount by the railway company. The board of equalization arrived at the total amount of $164,400 for the value of the easement, right of way, or franchise, by taking the abutting properties and figuring the value of the ground and taking 50 per cent. off it. On certain streets a 100 per cent. value was charged, and on cross streets or intersections a 50 per cent. value was charged. The railway company vigorously protested this assessment. The trial court found that in making the assessment the board of equalization took into consideration as an element thereof "the right of the railway company to operate its trains and maintain its tracks over and through certain specific streets and alleys of the city at the sum of $164,400.00."

The following constitute the findings and conclusions of the trial court:

"Findings of Fact.

"For the years 1925, 1926, 1927, and 1928, the property of the defendant was assessed by the city, as `2.77 miles of main line, etc., at $229,931.00 per mile.' In arriving at this valuation the City, as an element thereof, valued the right of defendant railroad to operate its trains, and maintain its tracks over and through certain specific streets and alleys of the city, at the sum of $164,400.00. When the taxes were due for the years in question, defendant tendered to the city an amount in payment thereof, less the taxes on the value to the extent of $164,400.00, which as aforesaid, was contended by the city to represent the value of said right of way.

"II.

"The ordinances levying city taxes under which plaintiff seeks to collect the taxes herein, were duly and legally passed and were, and are, in all respects, valid and legal ordinances.

"III.

"It is undisputed that if said element of value was properly taxable and properly assessed, that for the year 1925 the defendant owes $3,109.07 taxes and $1,400.05 penalty and interest, making a total of $4,509.12; for the year 1926, $3,103.48 taxes and $1,087.33 penalty and interest, making a total of $4,190.81; for the year 1927, $3,188.40 taxes and $798.10 penalty and interest, making a total of $3,986.50; for the year 1928, $3,188.40 taxes and penalty and interest in the amount of $479.26, making a total of $3,667.66.

"IV.

"The value of the right of way, that is the easement arising by virtue of the franchises granted by the city of El Paso, was valued for the purpose of taxation in relation to the abutting land on either side of the street. The value per square foot of the right of way, that is the street, was taken at fifty per cent. of the value per square foot of said abutting land. The value of the abutting property was estimated upon the basis of its market value. There is and was no actual nor logical relationship between the value of the street and land held in fee, and the value of defendant's franchises or easements. The standard used by the assessing authorities could not reflect in any fair degree of approximation the true value of the right they sought to tax.

"V.

"The assessing officers of the City endeavored, in good faith, in all the assessments in question, to arrive at a fair valuation of the property sought to be taxed.

"Conclusions of Law.

"An easement, arising by virtue of franchises granted by a city over its streets and alleys, does not constitute part of the right of way within the meaning of section 2 of Article 7168 of the Revised Statutes. If said easement was taxable, the mode of arriving at such valuation for taxation was such that a fair valuation thereof could not be obtained."

The determination of this case involves two questions: (1) Was the franchise or easement, or both, granted by the city of El Paso to the railway company for the use of its streets taxable; and (2) if so, has the city properly and lawfully taxed them?

Certain fundamental rules have been announced by the Legislature with respect to the taxation of railroad properties in this state. For the taxation of the intangible assets of a railway company the Legislature has enacted chapter 4, title 122, articles 7098-7116, Vernon's Annotated Texas Civil Statutes, which provides for a state tax board to ascertain the true value of the intangible assets of a railway company for taxation, and to apportion such values for taxation to the various counties through which the lines of the railroad run. See State v. Texas & P. Ry. Co. et al. (Tex. Com. App.) 62 S.W.(2d) 81; Missouri, K. & T. R. Co. v. Shannon, 100 Tex. 379, 100 S. W. 138, 10 L. R. A. (N. S.) 681; Lively v. Missouri, K. & T. R. Co., 102 Tex. 545, 120 S. W. 852. The city of El Paso was not authorized to determine the values for taxation of the intangible assets of the railway company described in the foregoing statutes.

Our Supreme Court has said: "Franchises are defined to be `special privileges conferred by the government on individuals, and which do not belong to the citizens of the country generally, of common right.'" State v. Austin & N. W. R. Co., 94 Tex. 530, 62 S. W. 1050, 1052. See, also, 19 Texas Jurisprudence, pp. 875, et seq.

In 19 Corpus Juris, p. 862, the definition and nature of an easement is given in the following language: "An easement is a liberty, privilege, or advantage without profit, which the owner of one parcel of land may have in the lands of another; or to state it from the opposite point of view, it is a service which one estate owes to another, or a right or privilege in one man's estate for the advantage or convenience of the owner of another estate." See 15 Texas Jurisprudence, p. 769, et seq., and authorities cited.

Municipal corporations derive the power to tax property within their jurisdictions by virtue of authority delegated to them by the state. This authority is found in the Constitution or statutes. The Legislature, subject always to constitutional limitations, may delegate to cities such power. 30 Texas Jurisprudence, p. 460, et seq. Article 8, § 5, of the Constitution of Texas provides that: "All property of railroad companies, of whatever description, lying or being within the limits of any city or incorporated town within this State, shall bear its proportionate share of municipal taxation, and if any such property shall not have been heretofore rendered, the authorities of the city or town within which it lies, shall have power to require its rendition, and collect the usual municipal tax thereon, as on other property lying within said municipality."

Article 11, § 5, of the Constitution, known as the "Home Rule Amendment," and article 1175, subd. 7,...