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Statement of the Case.

railroad, telephone and cable companies; a consideration of the real estate of complainant situated in the city of New York, which is of great value, to wit, of the value of $3,500,000, and in the city of Chicago, which is of great value, to wit, of the value of $1,700,000, and of the real estate of complainant of great value, situated in many other States and countries, none of which is situated in the State of Indiana; as well as the consideration of the actual value of all complainant's telegraph lines, poles, wires, cables, conduits, instruments, appliances and office furniture, including that which is situated in Indiana and taxable by the State of Indiana.

"That, in estimating such market or actual value of the shares of the stock of complainant, the values of said intangible franchises, rights, contracts, earnings, business, business ability, enterprise, skill and management and good will, and of all said real and personal estate of complainant, are blended so as to render it impossible to separate and distinguish the portions of value applicable to any or each of said elements of value of said shares."

That the plaintiff was the owner of many thousand miles of telegraph in the States of Massachusetts, New York, Pennsylvania and New Jersey, and in other densely populated portions of the United States, of the cost and value of $2500 per mile on the average, and requiring great expenditures for the maintenance thereof; of many thousand miles of cable under the high seas, of the cost and value of $3500 per mile on the average; and of many thousands of miles of lines of telegraph in uninhabited or sparsely inhabited portions of the United States and Mexico, which, by reason of the great cost of transportation of material, and cost of maintenance, were of great cost and value; that all the plaintiff's lines in the State of Indiana, by reason of the proximity to supplies of material, and the very cheap transportation, were of minimum value, as compared with the plaintiff's lines situated elsewhere; and that, by reason of these facts, the average mile of the telegraph line of the plaintiff within Indiana was of the value of forty per cent of the value of the average mile of the whole line situated outside of the State of Indiana, reckoning such

Statement of the Case.

value upon the cost of construction and maintenance, and making allowance for deterioration.

That sixty-six per cent of the plaintiff's whole business in transmitting telegraphic messages, and sixty per cent of its business in the State of Indiana, was interstate and international business; and that the average net earnings of a mile of the line in the State of Indiana amounted to only sixty per cent of the net earnings of the average mile of its line outside of the State.

That the plaintiff duly accepted the provisions of the act of Congress of July 24, 1866, c. 230, now sections 5263-5269 of the Revised Statutes; that all the telegraph lines owned or operated by the plaintiff in Indiana were constructed upon railroads, streets and other post roads of the United States, and thereby the plaintiff was an agent of the government of the United States in the transmission of intelligence by electricity; and that the Statute of Indiana of March 6, 1893, and the assessment and valuation of the plaintiff's property under that statute, rendered its property in Indiana substantially valueless, and prevented it from performing its obligations to the United States.

That much of the plaintiff's capital stock, to the amount of $7,633,230, "is invested in and represented by the capital stock and bonds of other telegraph and telephone corporations, whose telegraph or telephone plants are leased to or operated by complainant, which said telegraph and telephone corporations possess no property in the State of Indiana, and do not own or use any franchise granted by the State of Indiana, and are wholly situated outside of the State of Indiana.

"That the attempted and pretended valuation of complainant's said property by said state board of tax commissioners, in manner aforesaid, upon the value of complainant's shares of stock, whether said board pretended to value said property upon a basis which included the consideration or estimation of market value or actual value of the shares of stock of complainant, necessarily includes, and does in fact include, values which are no part of the true cash value of the property of complainant in Indiana; but are imputed, and fictitious values

. Counsel for Plaintiff in. Error.

distributed to complainant's said property in Indiana, as portions of the value of the business, business ability, enterprise and skill of complainant, of the real and personal estate owned and leased by complainant and outside of the State of Indiana, and of complainant's franchises granted by States other than Indiana and municipalities outside of Indiana, and by the United States and by foreign States and nations, and of the contract relations and other relations existing between complainant and other corporations, all of which said property, things in action, and other things and matters of value, are beyond the jurisdiction of the State of Indiana, whether for the purpose of taxation or for any other purpose."

That the auditor of the State, on September 15, 1893, certified the valuation aforesaid to the auditors of the counties through which the plaintiff's telegraph lines extended; and that the county auditors were engaged in apportioning and distributing the same among the townships, and were preparing to deliver tax duplicates to the county treasurers, to the end that they might collect the tax from the plaintiff.

That the statute of 1893, c. 171, was contrary to the constitution of Indiana in various particulars pointed out, (but not now relied on,) and that this statute, and the assessment and valuation of the plaintiff's property by the state board of tax commissioners in compliance with its provisions, levied a tax upon interstate and international commerce, in violation of article 1, section 8, of the Constitution of the United States, and deprived the plaintiff of its property without due process of law, and denied it the equal protection of the laws, in violation of the Fourteenth Amendment of the Constitution. . The defendants demurred generally to the bill. The court sustained the demurrer, and, the plaintiff declining to amend its bill, entered final judgment for the defendants. The plaintiff appealed to the Supreme Court of Indiana, which affirmed the judgment. 141 Indiana, 281. The plaintiff thereupon sued out this writ of error.

Mr. John F. Dillon, (with whom was Mr. Rush Taggart on the brief,): for plaintiff in error.

Argument for Plaintiff in Error.

I. In the method of valuation prescribed by the statute and in the assessment now in question actually made by the board of assessors pursuant to the statute, there was necessarily included a valuation of the Federal franchises of the plaintiff in error, which Federal franchises, or the value thereof, are not taxable by the State of Indiana.

In discussing this point Mr. Dillon cited aud commented on California v. Central Pacific Railroad Co., 127 U. S. 1; Pittsburgh &c. Railway v. Backus, 154 U. S. 421, 439; The Delaware Railroad Tax, 18 Wall. 206; State Railroad Tax cases, 92 U. S. 575; People v. Coleman, 126 N. Y. 433; People v. Barker, 146 N. Y. 304; Western Union Telegraph Co. v. Massachusetts, 125 U. S. 530; 141 U. S. 40. With reference to the last two cases he said:

We distinguish the case at bar from the Massachusetts case on these two grounds: (1) That in the case at the bar it is expressly averred that the valuation complained of in the bill of complaint did include the value of the Federal and other franchises of the company; and, (2) That, by so including them, an unfair result was obtained, since the result was to value and assess property of the company in Indiana far beyond its actual and real value under any of the tests which have been suggested by this court.

If a tax levied by a State is upon a Federal "franchise" it is settled that it is unconstitutional. McCulloch v. Maryland, 4 Wheat. 316; Osborn v. Bank of the United States, 9 Wheat. 738; Brown v. Maryland, 12 Wheat. 419; Weston v. Charleston, 2 Pet. 449; California v. Central Pacific Railroad, 127 U. S. 1. Nor is the Western Union Telegraph Company, having accepted the act of Congress of July 24, 1866, subject to have imposed on it a license tax by the State of Indiana. Leloup v. Port of Mobile, 127 U. S. 640; Asher v. Texas, 128 U. S. 129; Western Union Tel. Co. v. Alabama, 132 U.S. 472; Lyng v. Michigan, 135 Id. 161. A State may tax the "property" of a corporation having a Federal franchise, but it cannot tax the "Federal franchises" of a corporation. California v. Central Pacific Railroad, 127 U. S. 1.

That the Western Union company accepted the act of

Argument for Plaintiff in Error.

Congress of July 24, 1866, and thus acquired Federal franchises of a valuable character for which it yields to the United States a large consideration and subjects itself to great burdens, is an admitted fact upon the record.

That the value of this franchise was included by the State of Indiana in the valuation and assessment of the property of the Western Union Telegraph Company in the case at the bar is admitted of record. That such valuation largely exceeded the value of the property of the Western Union company situate within the State of Indiana is also admitted on the record.

The tax in the case at the bar is not a tax merely upon the "property," but includes a tax upon the Federal and other "franchises" of the telegraph company engaged in interstate commerce, which franchises are not derived from the State of Indiana, and are not taxable by it.

If you include in the gross valuation for assessment purposes the value of such franchises (which in this case it is admitted of record was done), can it be said that such franchises are not taxed? If such a doctrine be established by this court, it arms the States with the power to destroy the instrumentalities of interstate commerce, and they will exercise it as they have already begun to do without scruple and without limit.

II. The necessary effect of the method of taxation adopted by the taxing authorities of Indiana in this case was to bring within the operation of the statute of Indiana property, or the value of property, of the telegraph company outside of the State of Indiana. Such taxation cannot be deemed due process of law under the Fourteenth Amendment to the Constitution of the United States; and, therefore, the statute requiring or permitting such a mode of assessment, and the assessment made under it must be treated as unconstitutional and void.

III. The mode prescribed or allowed by the statute, section 7 of the act of March 9, 1893, viz., the market value of its shares, etc., for ascertaining the true cash valuation of the entire property of the plaintiff in error, which mode it is admitted on the record was followed by the tax commissioners of Indiana in arriving at the assessment now complained of, is a mode under which, as applied to the plaintiff

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