U.S. Trust Co. of New York v. Atlantic & P. R.Co.

• Decision Date: 18 December 1896
• Citation: 47 P. 725,8 N.M. 673,1896 -NMSC- 033
• Parties: UNITED STATES TRUST CO. OF NEW YORK et al. v. ATLANTIC & P. R. CO. et al. In re TERRITORY OF NEW MEXICO.
• Court: New Mexico Supreme Court

47 P. 725

8 N.M. 673, 1896 -NMSC- 033

UNITED STATES TRUST CO. OF NEW YORK et al. v. ATLANTIC & P. R. CO. et al.

In re TERRITORY OF NEW MEXICO.

Supreme Court of New Mexico

December 18, 1896

Appeal from district court, Bernalillo county; before Justice N. C Collier.

Action of foreclosure by the United States Trust Company of New York against the Atlantic & Pacific Railroad Company and others. From an order, made on an intervening petition filed by the territory of New Mexico, requiring C. W. Smith, as receiver of the defendant company, to pay certain taxes, plaintiff and the receiver appeal. Reversed.

This is an appeal from the order of the district court of Bernalillo county, sitting as a court for the hearing and trial of causes arising under the constitution and laws of the United States, taken by the receiver (appointed by it) of the property of the Atlantic & Pacific Railroad Company, and by the United States Trust Company, complainant in that action. The order required the receiver to pay to the treasurer of Bernalillo county taxes aggregating the sum of $43, 254.70 which were levied upon property placed upon the assessment roll in the year 1895 by the assessor, as property omitted by the railroad company to be returned for the year 1893, as property omitted to be returned for the year 1894, and as property omitted to be returned for the year 1895, with 25 per cent. penalty added for the year 1895. The separate amounts of this aggregate being $13,978 for 1893, $12,768.78 for the year 1894, and $16,585.14 for the year 1895. The Atlantic & Pacific Railroad Company was incorporated by the act of congress of the United States approved July 27, 1866. Among the provisions contained in its charter was one authorizing the company to lay out, locate, construct furnish, maintain, and enjoy a continuous railroad and telegraph line from Springfield, Mo., to the Pacific Ocean practically along the thirty-fifth parallel of latitude, and granting to it, in the second section, a right of way through the public lands, 200 feet in width, with sufficient grounds for station buildings, workshops, depots, machine shops, switches, side tracks, turntables, and water stations; also, the power to acquire a right of way and station grounds of the same character through private lands, by condemnation proceedings provided for in the act. The second section of the act exempted from taxation within the territories of the United States the right of way. The sections referred to, and others of the charter, are thereafter, in the brief, set out in full. The Atlantic & Pacific Railroad Company afterwards constructed its line of road from Isletta Junction, 15 miles west of Albuquerque, to the Colorado river, and maintained and operated the same to such point, and beyond, from the year 1882 up to the present time, except that in January, 1894, receivers were appointed, in foreclosure proceedings commenced in the Second judicial district court of the territory of New Mexico, for the property of the Atlantic & Pacific Railroad Company; and such receivers took possession of and operated said railroad up to February 1, 1896, when, in another foreclosure proceeding, and in the same one, the present receiver, C. W. Smith, was appointed receiver of the property of the Atlantic & Pacific Railroad Company in New Mexico, Arizona, and California. In the year 1893 the railroad company returned for assessment to the assessor of Bernalillo county property of the value of $530,960, and for the year of 1894 the receivers returned property to the same value, and for the year 1895 the receivers returned property to the same value. During none of these years was the right of way, station grounds, or superstructures thereon, returned for taxation by the company or by the receivers, as each claimed that the same were exempt from taxation. In the year 1895 the assessor for Bernalillo county, under the instructions of the board of county commissioners, assessed as personal property (describing the same as such) the entire superstructures of the railroad on its right of way and station grounds in Bernalillo county, although each and every part of the property to described and assessed was attached to, and a part of, the right of way and station grounds of the railroad company. A tax was levied upon each of these assessments, and subsequently, in March, 1896, the territory, upon permission of the court, filed in the foreclosure case of the United States Trust Company an intervening petition to recover such taxes. An order to show cause why the intervening petition should not be granted was properly served upon the parties to the foreclosure suit, and subsequently the United States Trust Company, the complainant in the foreclosure suit, and C. W. Smith, the receiver appointed in such suit, filed answers showing cause why the intervening petition should not be granted. Subsequently an agreed statement of facts was made between the parties, and the cause submitted and heard upon such agreed statement of facts. Subsequently the court found that these assessments were valid, and ordered the receiver to pay out of the property and funds in his hands the sum of $43,254.70 to the treasurer of the county. A stipulation was made between the parties, in which the territory entered its appearance herein, and in which it was agreed as to the parts of the record which should constitute a transcript in this case.

Assignments of errors: First, That the court below erred in holding that the additional assessment of $539,950 levied and assessed by the assessor of the county of Bernalillo for the year, 1893 as property omitted for that year, and placed upon the assessment roll of the year 1895, was a valid assessment, and that the tax levied thereupon in the year 1895 was and is a valid lien upon the property and franchises of said railroad company now in the custody and control of the receiver of that court. Second. That the court below erred in holding that the additional assessment of $539,950 levied and assessed by the assessor of the county of Bernalillo for the year 1894 as property omitted for that year, and placed upon the assessment roll for the year 1895, was a valid assessment, and that the tax levied thereon in the year 1895 was and is a valid lien upon the property and franchises of said railroad company now in the custody and control of the receiver of that court. Third, That the court below erred in holding that the additional assessment of $539,950, together with the 25 per cent, penalty added to such amount, levied and assessed by the assessor of the county of Bernalillo as property omitted to be returned for the year 1895, was and is a valid assessment, and that the taxes levied thereon for the said year 1895 are a valid lien upon the property and franchises of the said railroad company now in the custody and control of the court. Fourth. The court below erred in holding and decreeing that the receiver should pay to the treasurer of the county of Bernalillo the sum of $43,254,70. as taxes due from the Atlantic & Pacific Railroad Company, and the receiver thereof, for the years 1893, 1894, and 1895, upon the property placed upon the assessment roll by the assessor of Bernalillo county as omitted property, and erred as to the amount ordered to be paid as taxes for each of said years.

C. N. Sterry and Karl Snyder, for appellee Atlantic & P. R. Co.

John P. Victory, Sol. Gen., and T. N. Wilkerson, for the Territory.

SMITH C.J. (after stating the facts).

It has been adjudicated by the court of last resort (Railroad Co. v. Pension, 18 Wall. 5) "that the state can impose a tax upon the property of corporations chartered by congress as agents to subserve the lawful purposes of the government. Provided that such tax does not deprive such organizations of the power to serve the government as they were intended to serve it, it does not hinder the efficient exercise of their power." It is difficult to appreciate that the legality of a tax must be determined by its effect,--that its constitutionality is contingent upon its operation; and it is suggested that, if such consideration is decisive, the issue is not one of right, but of feasibility. The same case affirms the distinction before made by said tribunal between the franchise and property of such corporations, pronouncing the one exempt from taxation by the states, and the other liable to assessment, upon the ground that the one is upon the operation of said corporation, and the other upon their possessions,-their property; it being represented that existence in the one case is involved, but in the other efficiency only. If the tax is right or wrong legal or unauthorized, according to its effect, it would seem that it can be placed upon the franchise as well as upon the property, providing that it should not deprive the corporation of the power to fulfill the purposes for which they were created by congress. Banks are not rendered inefficient of failures by a tax upon the right to do business, nor are railroads forced into liquidation by the executions of the states whose area they traverse. However, res adjudicata by the supreme court of the United States constitutes the law; and it is now established, as the attribute of the nominal sovereignty of states, that they are supreme in their power of taxation upon the property within their jurisdiction,--however, that they cannot so exercise this power as to arrest or impair the operations of the general government. But it is yet to be determined whether the territories are equally absolute in their domain. Territorial governments are the anomalous creatures of the congress of the United States,--conceived, presumably, from the necessity of conditions. They possess neither sovereignty nor...