Adams Express Co. v. Ohio State Auditor
165 U.S. 194 (1897)

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U.S. Supreme Court

Adams Express Co. v. Ohio State Auditor, 165 U.S. 194 (1897)

Adams Express Company v. Ohio State Auditor

No. 337

Argued December 10-11, 1896

Decided February 1, 1897

165 U.S. 194

Syllabus

The decision of the Supreme Court of Ohio entertaining jurisdiction of this case, and delivering a considered opinion, State v. Jones, 61 Ohio St.

Page 165 U. S. 195

492, adjudging the Nichols Law to be valid under the constitution of that state, will not be reviewed by this Court.

Although the transportation of the subjects of interstate commerce, or the receipts received therefrom, or the occupation or business of carrying it on, cannot be directly subjected to state taxation, yet property belonging to corporations or companies engaged in such commerce may be, and whatever the particular form of the exaction, if it is essentially only property taxation, it will not be considered as falling within the inhibition of the Constitution.

The property of corporations engaged in interstate commerce, situated in the several states through which their lines or business extends, may be valued as a unit for the purposes of taxation, taking into considerate tion the uses to which it is put and all the elements making up aggregate value, and a proportion of the whole fairly and properly ascertained may be taxed by the particular state without violating any federal restriction.

While there is an undoubted distinction between the property of railroad and telegraph companies and that of express companies, there is the same unity in the use of the entire property for the specific purposes, and there are the same elements of value, arising from such use.

The classification of express companies with railroad and telegraph companies as subject to the unit rule does not deny the equal protection of the laws; as that provision in the Fourteenth Amendment was not intended to prevent a state from adjusting its system of taxation in all proper and reasonable ways, and was not intended to compel a state to adopt an iron rule of equal taxation.

The statute of the State of Ohio of April 27, 1893, 90 Laws Ohio 330 (amended May 10, 1894, 91 Laws Ohio, 220) created a board of appraisers and assessors, and required each telegraph, telephone and express company doing business within the state to make returns of the number of shares of its capital, the par value and market value thereof, its entire real and personal property, and where located and the value thereof as assessed for taxation, its gross receipts for the year of business wherever done and of the business done in the State of Ohio, giving the receipts of each office in the state, and the whole length of the line of rail and water routes over which it did business within and without the state. It required the board of assessors to

Page 165 U. S. 196

"proceed to ascertain and assess the value of the property of said express, telegraph, and telephone companies in Ohio, and in determining the value of the property of said companies in this state, to be taxed within the state and assessed as herein provided, said board shall 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 companies, as determined by the value of the capital stock thereof, and the other evidence and rules as aforesaid."

Held:

(1) That, assuming that the proportion of capital employed in each of the several states through which such a company conducts its operations has been fairly ascertained, while taxation thereon or determined with reference thereto may be said in some sense to fall on the business of the company, it does so only indirectly, and that the taxation is essentially a property tax, and, as such, not an interference with interstate commerce.

(2) That the property so taxed has its actual situs in the state, and is therefore subject to its jurisdiction, and that the distribution among the several counties is a matter of regulation by the state legislature.

(3) That this was not taking of property without due process of law, either by reason of its assessment as within the jurisdiction of the taxing authorities or of its classification as subject to the unit rule.

(4) That the valuation by the assessors cannot be overthrown simply by showing that it was otherwise than as determined by them.

These are cases involving the constitutionality of certain laws of the state of Ohio providing for the taxation of telegraph, telephone, and express companies, and the validity of assessments of express companies thereunder.

The General Assembly of Ohio passed, April 27, 1893, an act to amend and supplement §§ 2777, 2778, 2779, and 2780 of the Revised Statutes of that state (commonly styled the "Nichols Law"), which was amended May 10, 1894. The law created a State Board of Appraisers and Assessors, consisting of the Auditor of state, Treasurer of state, and Attorney General, which was charged with the duty of assessing the property in Ohio of telegraph, telephone, and express companies. By the act as amended, between the first and thirty-first days of May annually, each telegraph, telephone, and express company doing business in Ohio was

Page 165 U. S. 197

required to file a return with the Auditor of the state setting forth, among other things, the number of shares of its capital stock; the par value and market value (or, if there be no market value, then the actual value) of its shares at the date of the return; 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. Telegraph and telephone companies were required to return also 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, including the lines controlled and used, under lease or otherwise. Express companies were required to include in the return a statement of their entire gross receipts, from whatever source derived, for the year ending the first day of May, of business wherever done, and of the business done in the State of Ohio, giving the receipts of each office in the state; also, the whole length of the lines of rail and water routes over which the companies did business, within and without the state. Provision was made in the law for the organization of the board, for the appointing of one of its members as secretary, and the keeping of full minutes of its proceedings. The board was required to meet in the month of June, and assess the value of the property of these companies in Ohio. The rule to be followed by the board in making the assessment was that,

"in determining the value of the property of said companies in this state to be taxed within the state and assessed as herein provided, said board shall 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 companies, as determined by the value of the capital stock thereof, and the other evidence and rule as aforesaid."

As to telegraph and telephone companies, the board was required to apportion the valuation among the several counties through which the lines ran in the proportion that the length of the lines in the respective counties bore to the

Page 165 U. S. 198

entire length in the state. In the case of express companies, the apportionment was to be made among the several counties in which they did business in the proportion that the gross receipts in each county bore to the gross receipts in the state.

The amount thus apportioned was to be certified to the county auditor, and placed by him on the duplicate, "to be assessed, and the taxes thereon collected the same as taxes assessed and collected on other personal property," the rate of taxation to be the same as that on other property in the local taxing district.

The valuation of all the real estate of the companies situated in Ohio was required to be deducted from total valuation as fixed by the board.

Provisions were made for hearings, and for the correction of erroneous and excessive valuations, as follows:

"At any time after the meeting of the board on the first Monday in June and before the assessment of the property of any company is determined, any company or person interested shall have the right, on written application, to appear before the board and be heard in the matter of the valuation of the property of any company for taxation. After the assessment of the property of any company for taxation by the board, and before the certification by the auditor of state of the apportioned valuation to the several counties, as provided in section 2780, the board may, on the application of any interested person or company or on its own motion, correct the assessment or valuation of the property of any company in such manner as will in its judgment make the valuation thereof just and equal. The provisions of section 167 of the Revised Statutes shall apply to the correction of any error or overvaluation in the assessment of property for taxation by the state board of appraisers and assessors, and to the remission of taxes and penalties illegally assessed thereon."

Section 167 of the Revised Statutes, referred to, reads thus:

"SECTION 167. He [the auditor of state] may remit such taxes and penalties thereon as he ascertains to have been illegally assessed, and such penalties as have accrued or may

Page 165 U. S. 199

accrue in consequence of the negligence or error of any officer required to do any duty relating to the assessment of property for taxation, or the levy or collection of taxes, and he may from time to time correct any error in any assessment of property for taxation or in the duplicate of taxes in any county, provided that when the amount to be remitted in any one case shall exceed one hundred dollars, he shall proceed to the office of the governor and take to his assistance the governor and attorney general, and in all such cases may remit no more than shall be agreed upon by a majority of the officers named."

Instead of distributing the valuation as under the act of 1893, the state board, by the act of 1894, was to certify it to the auditor of state, whose duty it was made to apportion and certify the valuation among the counties.

In No. 337, the taxes for 1893 were involved; and in Nos. 338, 339, and 340, the taxes for 1894. These are appeals from the Circuit Court of Appeals for the Sixth circuit. In Nos. 398, 399, and 400, the taxes for 1895 were involved. These are appeals from decrees of the Circuit Court for the Southern District of Ohio.

The original suits were brought in the circuit court to enjoin the certification of the apportioned valuations to the county auditors, as to 1893, against the state board; as to 1894 and 1895, against the auditor of state.

The circuit court (Taft, J.), on April 23, 1894, after a preliminary opinion, filed opinions in the case of Western Union Telegraph Company against the State Board, 61 F. 449, and in No. 337, Adams Express Co. v. Poe, 61 F. 470, holding the Nichols Law to be invalid under the Constitution of Ohio. On the first of May following, the Supreme Court of Ohio decided that the Nichols Law was constitutional and valid. State v. Jones, 51 Ohio St. 492.

Thereupon the circuit court reversed its ruling and accepted the decision of the supreme court of the state, and Judge Taft filed a further opinion holding that the assessments were valid. 64 F. 9.

In all the cases, the final decrees of the circuit court dissolved

Page 165 U. S. 200

the temporary injunctions which had been granted, sustained demurrers, and dismissed the bills.

The circuit court of appeals affirmed the cases taken to it on appeal. 69 F. 546; 69 F. 557.

The proceedings of the state board in making the assessments for 1895, and certain correspondence, are set forth in the records as if exhibits to the bills. The action of the board, relative to express companies, is thus given:

"The board having given each express company doing business in Ohio, whose property in Ohio is hereinafter assessed, opportunity to appear and be heard personally by the board, and having heard all companies which desired to be heard through their officers, agents, or counsel, and having carefully considered the facts set out in the returns, schedules, and supplementary statements of such companies, and all evidences of value and all matters bearing upon the question of the value of the property of the companies, which, in the judgment of the board, would assist it in arriving at the true value, in money, of the entire property of each of said companies within the State of Ohio, on motion, the state board of appraisers and assessors unanimously fix and determine the values of the property of express companies hereinafter named in Ohio, to be taxed therein, at the amounts set out in the following table:"

The Adams Express Company . . . . . . . . $533,095.80

The American Express Company. . . . . . . 499,373.60

The United States Express Company . . . . 488,264.70

This valuation was made July 24, 1895. On the second of August, counsel for the companies wrote the auditor requesting to be advised of the assessments when made, in order that they might apply for a correction. On the seventh of August, the secretary of the board informed counsel of the assessments. On August 10, counsel wrote, asking

"upon what calculation, if any, the apparently precise amounts of the assessments, especially in the case of the express companies, are based, and how the figures are arrived at."

The auditor replied for the board that

"the method pursued

Page 165 U. S. 201

by the state board of appraisers and assessors this year in assessing the property in Ohio of the Western Union Telegraph Company and the express companies you represent is not different from that followed in former years, has been sustained by the courts, and is set forth in the records of the board."

Attention was called to certain data lacking in the companies' returns, and counsel were informed that opportunity would be afforded for a hearing on September 2, at 10 o'clock a.m., but the three bills involving these assessments were filed August 14, 1895. Subsequently returns were filed, as of May 1, 1895, showing:

As to the Adams Express Company: Number of shares, 120,000. Market value, $140 to $150. Taxable value of real estate owned in Ohio, $25,170. Value of personal property, including moneys and credits, owned by company in Ohio, $42,065. Total value of real estate owned outside of Ohio, $3,005,157.52. Total value of personal property owned outside of Ohio, $1,117,426.05. Entire gross receipts, from whatever source, received within the state for the year, $282,181. Whole length of lines of rail and water routes over which the company was doing business, 29,647 miles. Length without the state, 27,518 miles; within the state, 2,129 miles.

As to the United States Express Company: Number of shares, 100,000. Par value, $100. Market value, $40. Taxable value of real estate owned in Ohio, $22,190. Value of personal property, including moneys and credits, owned in Ohio, $28,438. Entire gross receipts, from whatever source, derived within the state, $358,519. Length of lines within the state over which the company was doing business, 3,011 miles.

As to the American Express Company: Number of interests, 180,000. Par value, $100. Market value, $112. Taxable value of real estate in Ohio, $58,660. Value of personal property, including moneys and credits, in Ohio, $23,430. Total value real estate outside of Ohio, $4,891,259. Total value of personal property outside of Ohio, $1,661,759. Gross receipts within the state, $275,446. Whole length of lines, 35,295 miles; length within the state, 1,731 miles.

Page 165 U. S. 202

The companies made no return of their entire gross receipts of business, wherever done, nor of the terms of their contracts or arrangements for transportation.

These returns stated, and the bills repeated, that, aside from the real estate mentioned, the companies had no property in the State of Ohio "except certain horses, wagons, harness, trucks, safes, and office fixtures located at different points," and that their actual value was given. That

"the business of the company in the state consists in carrying packages on passenger and express trains, steamboats, and stages, in the care and custody of its employees, who accompany the packages. The express company has no ownership of nor interest in these means of conveyance, and simply pays to the railroad companies and the owners of the steamboats and stage coaches for the passage of messengers and their accompanying packages. The horses, wagons, and trucks are used by it in the collection and delivery of these packages. There is no peculiarity about this property. It is of an ordinary kind, whose true value in money must be measured by the ordinary standards, and is easily ascertained and determined."

Each of the bills in Nos. 398, 399, and 400 alleged that the scheme of taxation contemplated by the act,

"while professing to provide for taxation of property in the State of Ohio, does not in fact, do so, inasmuch as it directs the state board of appraisers, in determining the value of the property of express companies in said state for the purpose of taxation, to be"

"guided by the value of said property as determined by the value of the entire capital stock of said company . . . in the proportion which the same [viz., the property of the companies within the state] bears to the entire property of said companies, as determined by the value of the capital stock thereof;"

that

"the value of the capital stock or shares of said company, and of express companies generally, is determined not so much by the value of the property and appliances which they use in carrying on their business as by the skill, diligence, fidelity, and success with which they conduct their business. Said company employs many thousands of men, who are constantly engaged in carrying express packages,

Page 165 U. S. 203

many of them of great value, from one part of the country to another, and its income and the value of its shares are largely the result of their efforts, fidelity, and integrity, and of skillful management and supervision of the business. Said company, furthermore, owns real and personal property of great value, aside from the appliances of its express business, which is not held or taxable in the State of Ohio, and some of which is not taxable at all, all of which, however, together with the business connections of the company, and the reputation and goodwill which it has earned in the course of more than fifty years of public service, enter largely into the value of its capital shares;"

that the market price of the company's shares does not

"afford any fair, reasonable, or just method of estimating the value of its property, or fixing the basis of value for the purpose of taxation, because the market price is speculative and variable, depending upon financial conditions not at all connected with this company, its business, or its property; and your orator insists that said scheme of taxation is unfair, illegal, unjust, and unequal, and is a regulation of and a tax upon interstate commerce, and a taking of its property without due process of law;"

that the act, and the assessments made thereunder, are in contravention of the Constitution of the United States, because act provides for the assessment of, and the assessments embrace, property not situated within the jurisdiction of the State of Ohio, and the property of the companies is therefore taken without due process of law; and that the scheme, as a special one, imposes an illegal burden on interstate commerce, and denies the equal protection of the laws.

Page 165 U. S. 218

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