If the law of the state permits it, the fact that the making of
an assessment is delayed does not detract from the authority or the
duty of the assessing power to make it.
The fact that the assessment is made by memoranda on the
assessment envelope or jacket does not render it ineffectual as
lacking in due process of law because not recorded in a permanent
book, and where the state court has held that an assessment so made
is good under the law of the state, this Court will not hold that
it denied the party assessed due process of law or equal protection
of the law. A construction by the state court that an assessment
made by the board of assessors cannot enter into an arrangement
with the parties assessed contemplating the nonpayment of the tax
based thereon
Page 218 U. S. 552
does not deprive those parties of any constitutional rights
where no ground is shown for impugning the assessment so made.
The federal Constitution does not preclude a state from
requiring a corporation actually controlling and exercising a
franchise to pay the tax legally assessed thereon, although not the
actual owner of the franchise.
When the record does not show that others similarly situated
escaped the taxation imposed on the plaintiff in error, and the
state court has declared that, if any escaped, they are still
liable, this Court regards the contention of denial of equal
protection of the law as without merit.
128 Ky. 28 affirmed.
The facts, which involve the validity of an assessment, are
stated in the opinion.
Page 218 U. S. 555
MR. JUSTICE HUGHES delivered the opinion of the Court.
The Commonwealth of Kentucky recovered judgment in this suit
against the Illinois Central Railroad Company for the amount of the
tax, for the year 1897, upon the franchise formerly belonging to
the Chesapeake, Ohio & Southwestern Railroad Company. The
recovery
Page 218 U. S. 556
was based upon the fact that the Illinois Central Railroad
Company was, at the time to which the tax related, in possession of
the railroad, and was operating it under a power of attorney from
the purchaser at a judicial sale, and had made the report which was
required by the statute relating to the taxation of franchises. The
judgment was affirmed by the Court of Appeals of Kentucky. 128 Ky.
268. The Illinois Central Company petitioned for a rehearing, and
presented the federal questions now urged under the Fourteenth
Amendment of the Constitution of the United States. The court
entertained the petition and extended its opinion, holding that no
right of the appellant under the Fourteenth Amendment had been
violated by the decision. Thereupon this writ of error was brought,
and, as the state court passed upon the federal questions, this
Court has jurisdiction.
Mallett v. North Carolina,
181 U. S. 589;
Leigh v. Green, 193 U. S.
85.
The validity of the statutes of Kentucky providing for the
taxation of franchises is not assailed, and nothing is shown which
would open to dispute the taxable character of the particular
franchise here involved. The plaintiff in error, the Illinois
Central Railroad Company, contends that, by virtue of the judgment,
it has been deprived of property without due process of law first
in that there was no assessment upon which to base the recovery of
the tax, and second in that it has been held personally liable to
pay a tax upon a franchise of which it was not the owner. The
plaintiff in error also contends that it has been denied the equal
protection of the laws, as it insists that all other railroad
corporations were assessed for the purpose of franchise taxation
upon a different basis and by a different method, and that, as to
other railroad corporations, the assessments similar to the one in
question were abandoned.
The gist of the first contention -- that there was no
Page 218 U. S. 557
assessment -- is that an assessment implies a record, and that
there was no record, but only a memorandum; that an assessment must
be a definite act, and that here it was only tentative.
It appears that the railroad of the Chesapeake, Ohio &
Southwestern Railroad Company was sold at a judicial sale in the
summer of 1896 to Edward H. Harriman, who thereupon, under date of
August 19, 1896, executed a power of attorney to the Illinois
Central Railroad Company, authorizing it
"to take charge of the business, maintenance, and operation of
the railroad, . . . together with all the land, real estate,
leaseholds, easements, . . . and all other corporate property, real
and personal, lately belonging to the said Chesapeake, Ohio &
Southwestern Railroad Company, included in the said sale and
conveyance, and all the rights, privileges, immunities, and
franchises whatsoever"
which he had acquired. It was expressly authorized to receive
"all the earnings of the said railroad," to apply the same to the
expenses incurred in its "management, maintenance, and operation,"
and to take all proceedings necessary or expedient for these
purposes.
On September 15, 1896, the Illinois Central Company made a
report to the Auditor of Public Accounts of Kentucky with respect
to the railroad formerly the property of the Chesapeake, Ohio &
Southwestern Railroad Company, in accordance with the statute
governing the assessment of franchises. This report came before the
board of valuation and assessment, which was charged under the
statute with the duty of making the assessment. It was placed in an
envelop, or jacket, on the outside of which a proper form was
provided for the entry of the amount of capital, surplus, undivided
profits, all other assets, total capital, the amount to be deducted
for tangible property, the value of the franchise, and the amount
of the tax. Below this there were blank spaces for the
Page 218 U. S. 558
insertion of the dates of the first and final notices to the
corporation, of the notice to the county clerk, and of the payment
of the tax. The form upon the jacket was filled out by the
insertion of the name of the "Chesapeake, Ohio & Southwestern
R. Co., Louisville, Ky.," and the date of the report. In the
columns provided for the purpose, entries were made, setting forth
the "Total Capital, $6,700,000," "Less Tangible Property, etc.
$4,753,339," "Franchise, $1,946,661," and "Tax, $10,219.97." This
is the amount of the tax sued for and recovered in this action.
These entries were made early in the year 1898. The fact that
the making of the assessment for the year 1897 was delayed did not
detract from the authority and duty to make it.
Southern
Railway in Kentucky &c. v. Coulter, 113 Ky. 657. That the
Board of Valuation and Assessment was authorized to fix the value
of the franchise, and to make the entries setting forth their
determination, and that the entries upon the jacket were in fact
made by the Board in the discharge of its duty, do not admit of
question. The Commonwealth of Kentucky filed as a part of its
petition in the suit a copy of the indorsement on the jacket as a
correct copy of the assessment. This was introduced in evidence on
the commonwealth's behalf. The testimony presented in defense did
not in any way challenge the authenticity or official character of
the jacket entries. On the contrary, the testimony of the former
state auditor, who, as such, was chairman of the Board of Valuation
and Assessment leaves no room for doubt on this point. It also
sufficiently appears upon this record, and it is not open to
dispute here, that due notice of the assessment was given.
The point urged, in substance, is that the constitutional right
of the plaintiff in error has been violated, because the state
court has treated the entry on the jacket as a sufficient record of
the assessment. It is said that this
Page 218 U. S. 559
cannot be regarded as a record, because it lacks permanency. But
this, of course, depends upon the means of preservation and the
nature of the filing system adopted. There is no inherent reason
why such a record should not be suitably preserved. It is
unnecessary to review the numerous authorities which the industry
of counsel has collated, for it may be assumed that an assessment
should be recorded. It is obvious, however, that the state cannot
be denied the right to collect its taxes, and the assessment cannot
be held to have been in violation of the Constitution of the United
States because for convenience it was recorded -- in the form
provided for the purpose -- upon the jacket enclosing the report of
the railroad company, instead of in a separate book. If the Board
did not proceed properly to make the assessment according to the
statute, the corporation aggrieved had its remedy; if the
assessment was otherwise properly made, it cannot be defeated
because the determination was set forth in the manner
described.
The fact that the assessment was entered under the heading
"Chesapeake, Ohio & Southwestern R. Co., Louisville, Ky.," does
not invalidate it. The franchise which was the subject of the
assessment had belonged to the Chesapeake, Ohio & Southwestern
Railroad Company, and the entry suitably identified it. The report
which was made by the Illinois Central Company used the same
description. The information given by this report, prefacing the
amount of capital, value of assets, earnings, etc., is as
follows:
"Name of corporation -- Chesapeake, Ohio & Southwestern
Railroad company."
"Name the principal place of business of the corporation,
company, or association you represent -- Louisville, Kentucky."
"Give the name and official position of the officer making the
report. "
Page 218 U. S. 560
"Name, J. C. Welling. Position, Vice President, I. C. R. Co. --
Agt."
"The kind of business in which the said corporation, company, or
association is engaged."
"Operating railroad from Louisville, Kentucky, to Memphis,
Tennessee."
The conclusion that the assessment entered in this manner was
made in accordance with the law of the State of Kentucky was
necessarily involved in the decision of the Court of Appeals. And
the fact that, upon the report made by the plaintiff in error in
the circumstances stated, the assessment was entered under the name
of the company which had formerly owned the franchise furnishes no
ground for the contention here that there has been an absence of
due process of law.
Castillo v. McConnico, 168 U.
S. 674,
168 U. S.
682-684;
Witherspoon v.
Duncan, 4 Wall. 210.
But it is said that the assessment was only tentative, and that
the entry was merely a memorandum. It does not appear to be
tentative upon its face. That it was such in fact is a conclusion
sought to be derived from the testimony of the former state
auditor. His testimony was to the effect that he "did not expect
any tax to be paid" on the assessment; that the franchise
assessments which were made in 1898 were opposed, that there was
considerable discussion of the matter with the railroads, and that
finally, in 1899, an agreement was reached by which the assessments
of 1898 were abandoned. He says that
"in the matter of the Illinois Central Railroad Company, we
agreed not to assess the C. & O. S.W. for the first two years;
we agreed that -- in other words, that the amount we assessed
against the Illinois Central should be in full for all the
properties they controlled for four years, this assessment, and the
one sent out as final in 1898 we reconsidered and declined to
assess any franchise tax against that road for one or two years,
the first years -- two years, I think. In other words, the
agreement of
Page 218 U. S. 561
the Board was to reconsider these assessments entirely, and take
them back, in consideration of the fact that the road would pay the
next two assessments on the basis agreed upon."
The question is at once presented whether, after making the
assessment in 1898, the Board had any authority to deal with it in
this manner, or to enter into such a bargain with the railroad.
This is a matter of state law, and the Court of Appeals of Kentucky
had held that the Board had no such power, and that the first
assessment stood. In its opinion, the court said:
"The Board made the assessment in the way that all other
assessments were made. It gave notice of the assessment to the
railroad company, as required by statute, and at the end of thirty
days it gave notice, as provided by the statute, that the
assessment had become final. When this had been done, the matter
passed beyond the control of the Board. A final assessment had been
had, as provided by law, and if any injustice was done the
taxpayer, it was due entirely to his failure to appear before the
Board and ask a reduction of the assessment. No reliance could be
placed in such proceedings if the validity of the record was made
to depend upon the secret intentions of the assessing officer. The
validity of their actions depends upon what they do, and not upon
their undisclosed purposes. When the assessment had become final,
and the railroad company owed the state the amount of taxes thus
fixed, the assessing officers were without authority afterward to
make any agreement with the railroad to the effect that, if the
railroad would pay the taxes for 1899, they would forego collecting
the taxes for the previous years."
And on the petition for rehearing, the court added this
statement:
"When the Board made an assessment and sent out the preliminary
and the final notices, as provided by the statute, that the
assessment had been made, its action was final,
Page 218 U. S. 562
and the legal effect of its action must depend on what they did,
and not on the secret intentions of the auditor."
This construction of the powers of the state officers under the
statutes of the state relating to franchise assessments -- this
determination with regard to the finality of the assessment in
question -- does not violate any constitutional right of the
plaintiff in error. The assessment was made in accordance with the
law of the state; it was, under that law, a final assessment, and
no ground is shown here for impugning it.
It is insisted further that the enforcement of the tax by a
judgment
in personam against the plaintiff in error
constitutes an unconstitutional deprivation of property -- that is,
assuming that, under the statutes of the state, as construed by its
highest court, the plaintiff in error was liable for the tax,
nevertheless it could not properly be held, because it was not the
owner of the franchise upon which the tax was laid. But, by virtue
of the arrangement with the purchaser at the judicial sale, the
plaintiff in error was operating the railroad, and was in
possession and full control of the railroad property and its
earnings. It cannot be doubted that, under the federal
Constitution, the state is not precluded from fixing liability for
the payment of the tax, to which the franchise is subject, upon the
corporation actually exercising the franchise within the state, and
in control of the railroad property and its earnings. There is no
constitutional obligation requiring it to look further in order to
secure payment of the tax which it is entitled to levy.
Carstairs v. Cochran, 193 U. S. 10,
193 U. S. 16;
National Bank v.
Commonwealth, 9 Wall. 353.
It is also contended that plaintiff in error has been denied the
equal protection of the laws upon the ground that other railroad
corporations have not been assessed upon the same basis or by the
same method, or have not been held to the payment of taxes upon
such an assessment. This defense was not pleaded in the answer of
the
Page 218 U. S. 563
Illinois Central Company, and, in any event, the meager
testimony introduced at the hearing is utterly insufficient to
afford a basis for the argument. It does not satisfactorily appear
that other railroad corporations were not assessed in the same way
and at the same time, or, assuming that they were so assessed, that
they are not liable to pay taxes accordingly. The Court of Appeals
of the commonwealth, in denying the petition for a rehearing,
said:
"As shown by the opinions of this court, cited in the opinion
herein, taxes have been imposed, based on the assessments in
controversy. All other taxpayers than railroads were taxed, and if
some railroads escaped, it is no reason that others should go free
while all taxpayers of other classes paid their taxes. If any
railroads escaped, they are still liable for their taxes unless
barred by limitation."
No conclusion to the contrary is justified by the record, and
the contention that the plaintiff in error has been denied the
equal protection of the laws, as the case lies before us, is
without merit.
Judgment affirmed.