W.U. Tel. Co. v. Poe

• Decision Date: 23 April 1894
• Parties: WESTERN UNION TEL. CO. v. POE, Auditor of State of Ohio, et al.
• Court: U.S. District Court — Southern District of Ohio

61 F. 449

WESTERN UNION TEL. CO. v. POE, Auditor of State of Ohio, et al.

United States Circuit Court, S.D. Ohio, Eastern Division.

April 23, 1894

The main questions at issue are of the validity, under the federal and Ohio constitutions, of a law of Ohio known as the 'Nicholls Law,' imposing taxes on telegraph telephone, and express companies. The bill avers that the complainant owns and operates lines of telegraph in nearly all of the states of the Union, including Ohio, said lines consisting of poles with cross arms, supporting suitable wires, for the transmission of telegraphic messages by means of electricity and employs thousands of men as officers and operators clerks and messengers, together with line repairers and others. That on April 27, 1893, the legislature of Ohio passed a law for the taxation of telegraph, telephone, and express companies, which made defendants a board of tax appraisers for such companies, and directed them to value and assess the property of such companies as follows:

'Sec. 2778a. Every express, telegraph and telephone company embraced in section 2777, whether chartered by the laws of this state, or any other state or county, doing business in this state, shall, annually, between the first and tenth days of May, return to the auditor of state, under the oath of its treasurer, the amount of its capital stock, its place of business, the par value and market value (or if there be no market value, then the actual value) of its shares at the time of said return. The return shall also contain a statement in detail of the entire real and personal property of said companies and where located and the value thereof as assessed for taxation; and telegraph and telephone companies shall, in addition thereto, return the whole length of their lines and the length of so much of their lines as is without and is within the state of Ohio, which lines shall include what said telegraph and telephone companies control and use, under lease or otherwise; and said board of appraisers and assessors shall in determining the value of the property of said companies in this state, to be taxed within the state and assessed as herein provided, be guided by the value of said property as determined by the value of the entire capital stock of said companies, and such other evidence and rules as will enable said board to arrive at the true value in money of the entire property of said companies within the state of Ohio in the proportion which the same bears to the entire property of said corporation, as determined by the value of the capital stock thereof, and the other evidence and rules as aforesaid. Express companies shall in making said return, include therein as a part thereof a statement of their entire gross receipts for the year ending the first day of May, of the business done within the state of Ohio; giving the receipts of each office in said state and the location thereof for said year.'

The bill further avers that complainant made a statement to the auditor, a copy of which is filed with the bill, showing the amount of its capital stock, and the market value thereof, so far as said market value could be shown, together with a statement of the location and value of its property in the state of Ohio, the number of miles of its telegraph lines in Ohio, and the total length of its lines everywhere. That, acting upon the information thus furnished, and under the requirements of the statute, and not in the exercise of their individual judgment of the valuation of the property of complainant, defendants made an appraisement and assessment against complainant of $2,011,000, wrongfully pretending that the sum is named as the value of complainant's property in Ohio. That, unless restrained by this court, the defendants, as such board, will certify this assessment, in accordance with the act, to the auditors of 87 counties in the state, wherein complainant's lines run, in the proportion of the mileage of lines in each county to the state mileage. That said auditors will, on receipt thereof, certify the same to the respective county treasurers for collection. That the rate of taxation in Ohio for the year 1893 varies, according to the county, from 2 1/2 to 3 per cent., so that the aggregate assessment against complainant upon said illegal and excessive valuation will amount to between $50,000 and $60,000, and in several counties of the state not only the assessment, but the difference between the assessment under said law and an assessment upon a true and lawful valuation of complainant's property will exceed $2,000. That in truth the entire value of complainant's property in Ohio at all times in the year 1893 prior to and subsequent to May 1, 1893, does not exceed $647,000, and, estimated as all other property is for taxation in the state, would fall far below that sum. That complainant is the owner of lines of Atlantic cable extending to Cuba and England, and connecting in England with lines of other companies extending to all parts of Europe, and also of lines in Canada. That the total mileage of its lines is 189,576 miles, including the mileage in Ohio, which is 8,272 miles. That the cash value of complainant's property cannot be ascertained approximately by applying the proportion which its lines in Ohio bear to the whole number of miles of its lines, upon a valuation of all the shares of its capital stock, because such a valuation includes elements of value not existing in Ohio, and not taxable within said state, and some of which are not taxable at all; and also because the lines are not of uniform value per mile, either as to gross or net income earned upon the various lines or as to cost of construction and maintenance. That included in the total mileage are thousands of miles of ocean cable, costing $4,000 per mile, while the lines per mile in Ohio cost but $103.60 per mile. That the income per mile in many states is much greater than in Ohio, and that the average income per mile in the entire system is much greater than that of the lines in Ohio. That the market price of complainant's stock affords no fair or reasonable or just method of forming an opinion as to the value of its property or of fixing a basis of value for the taxation thereof, because it is speculative and variable, dependent on conditions having no relation to complainant's business or property. That the actual value of complainant's shares is made up of property of various kinds in various states, of valuable contracts with railroad companies and other companies and individuals, of franchises conferred by act of congress of July 24, 1866 (14 Stat. 221), of franchises granted by other states and municipalities in them and by foreign governments, of business experience, good will, and skill employed in the prosecution of its business, of investments in bonds and stocks of other corporations aggregating $7,663,230.12, and real estate out of Ohio worth more than $5,000,000. That the tax proposed to be levied under the assessment sought to be enjoined would amount to 30 per centum of its earnings in Ohio from all its business in Ohio, including interstate commerce,-- an unheard of rate of taxation, and substantially destructive of its business in said state. That the complainant's property in Ohio is of the simplest character, consisting only of poles, wires, office furniture, and instruments used in telegraphy. The bill avers that the law is void, because it does not require the valuation of the property of complaint and other companies according to its true value in money, as the property of all other corporations and individuals is valued for taxation, and as all property is required to be valued for taxation under the state constitution in Ohio, but directs a valuation according to the opinion of the board of appraisers as to the value of the capital stock of such companies, which is determined by the diligence, fidelity, and skill with which the business of said companies is conducted, by its good will, and by the property of said companies in many states, and by the general financial conditions existing in the country. 'To the end, therefore, that the complainant may not be subjected to a multiplicity of suits which would otherwise be brought against it for the recovery of said assessment, to wit, suits in eighty-seven counties in which it does business in Ohio,' a provisional injunction restraining defendants from certifying the said assessment to the various county auditors in which complainant does business, and, after final hearing a perpetual injunction are prayed for.

Upon the filing of the bill, Judge Sage granted a temporary restraining order until a motion for a preliminary injunction could be made, heard, and disposed of. Defendants thereafter interposed a general demurrer to the bill. The motion and the demurrer came on for hearing. The court decided that the bill was defective, in that it admitted certain taxes to be due without any averment that they had been paid; but allowed complainant a week in which to pay them, and to file an amendment showing such payment. The amendment was filed. A reargument was ordered on the merits. The minutes of the board, which accompanied the affidavit, showed its findings and final action with reference to complainant as follows: 'That on the 1st day of May, 1893, the amount of the capital stock of said corporation, issued and outstanding, was $94,000,820. The par value of its shares was $100 each, and the market value of its shares on said day was $87 each. That the value of the entire capital stock of the company on said day was 940,008 1-5 shares at $87 a share, or $81,780,713.40. That there should be deducted from the value of the capital stock so found ($81,780,713.40) the value of the...