State ex rel. Milwaukee Street Railway Co. v. Anderson

63 N.W. 746, 90 Wis. 550, 1895 Wisc. LEXIS 284

• Court: Wisconsin Supreme Court
• Decided: September 26, 1895
• Status: Published

Opinion

Pinney, J.

The assessments against the Milwaukee Street Railway Company for the franchises of the Badger Illuminating Company and for the franchises of. the Edison Electric Illuminating Company cannot be sustained; and so, too, as to any property belonging to either of those companies. The franchises of the two last-named companies, and any property they may own, belong in law to them, respectively, and are proper matter of assessment against such companies only. Their franchises of existence are inalienable, and their other franchises and property they had no power to make over, by deed or transfer, to the street railway company, so as to disable them from performing the duties they owe, respectively, to the public as a consideration for the franchises granted to them.

It is contended on behalf of the railway company that its franchises are not liable to assessment and taxation, for the reason that no provision or rule has been enacted for their valuation; that its franchises and tracks, ties, stringers, poles, wires, etc., are real estate, and, as such, liable to assessment only in the ward or assessment district where situated; that it is not competent, in the present condition of the statutes and the city charter of Milwaukee, to assess the real estate on which its power houses are situated in the Fourth, Sixth, and Seventh wards or assessment districts, in the Third ward or district where the company has its principal office, and into and through which its road in part extends, with its franchises, tracks, etc., as an entirety; and that, if competent to assess its franchises and all property necessary to the operation of its road as an entirety, the assessment in question is void for the reason that such property has not been assessed as an entirety, the power houses and premises on which they are situated having been assessed separately from the franchises and other property in the wards or districts where situated. The questions involved are important, in view of the great and constantly increasing amount of capital invested and used in connection with such franchises by water, light, and street railway companies,— corporations of a quasi public character,— the franchises and property of which are charged, by reason of their legal connection, with important uses in favor of the public.

It was not denied — indeed, it was rightly conceded — that the franchises of the street railway company are property. It is believed that there is no authority to the contrary, nor is it seriously questioned but that the franchises of the company, and its property of whatever kind, necessary or essential to their exercise and use to carry out the purposes for which it was created, are in law an entirety, and indivisible, and not subject to severance by sale for taxes under the general operation of the tax laws or other legal process.

1. It is declared by statutes in force ever since the state was organized that “ taxes shall be levied upon all property in this state, except such as is exempted therefrom.” R. S. 1818, sec. 1034; R. S. 1858, ch. 18, sec. 1; R. S. 1849, ch. 15, sec. 1. And in each of these revisions there is found a section with several subdivisions exempting several kinds of property from taxation; but there never has been any statute in force exempting franchises of any quasi public corporation from taxation, except in the single instance of railroad companies. It has been provided ever since 1868 (Laws of 1868, ch. 130, sec. 2), when railroads operated by horse power here began to come in use, down to the passage of ch. 285, Laws of 1889, that the general exemption of railroad property contained in subd. 14, sec. 1038, E. S. 1818, should not apply “ to any railroad that now is or shall be operated by horse power, whether now or hereafter constructed, in any city or village.” After electric railways came into use, doubtless in view of the great amount of capital likely to be invested in such enterprises, and for greater certainty that such property should not escape taxation, ch. 285, Laws of 1889, was enacted, amending subd. 14 of said sec. 1038, and for that and no other purpose, and declaring that the exemption of “ the track, right of way,” etc., “ and all other property used in operating any railroad in this state belonging to any railroad company,” from taxation, “ shall not apply to any railroad that now is or shall be operated by horse, Gable or electrical power, whether now or hereafter constructed, in any city or village.” The sole object of this enactment was to incorporate in the statute the three words above italicized. As the franchises of this corporation, whether of existence or for the operation of its track, are beyond dispute the property of the corporation, it would seem clear that they are liable to assessment and taxation.

Franchises are classed as incorporeal hereditaments, though, as stated by Chancellor Kent (3 Kent, Comm. 459), “ with some impropriety, as they have no inheritable quality.” They are defined in Society for Savings v. Coite, 6 Wall. 594, 606, as “ legal estates vested in the corporation as soon as it is in esse,” and are as varied as the purposes for which corporations are created. In People ex rel. Panama R. Co. v. Commissioners of Taxes, 104 N. Y. 240, 247, it is held that they are not real property, and are not, “ within the tax laws, to be reckoned as a part of the realty; ” and in this view, although the authorities are not fully agreed on the subject, we entirely concur. The method of taxation in this state is upon the valuation of property taxed, and the statute does not provide for a certain, specific tax on franchises, like an excise rate, and known as a franchise tax, under methods of taxation in use in many of the states. “ In some states,” says Mr. Cooley in his work on Taxation (page 383), “ all taxation, as far as possible, is brought to an ad valorem standard. Franchises are property, and in such states may be taxed by valuation, being estimated for the .purpose either separately or as a part of the aggregate corporate property.” State Board of Assessors v. Central R. Co. 48 N. J. Law, 283, 288, 347. They have a value which can be estimated, and this is the proper duty of the assessor or the board of review. In State Railroad Tax Cases, 92 U. S. 603, it is laid down: “ That the franchise, capital stock, business and profits of all corporations are liable to taxation in the place where they do business, and by the state which creates them, admits of no dispute at this day. ‘ Nothing can be more certain in legal decisions,’ says this court in Society for Savings v. Coite, 6 Wall. 607, ‘than that the privileges and franchises of a private corporation . . . may be taxed by a state for the support of the state government.’ State Freight Tax Case, 15 Wall. 232; State Tax on Railway Gross Receipts, 15 Wall. 284.” In Wilmington Railroad v. Reid, 13 Wall. 268, the court says that “nothing sis better settled than that the franchise of a private corporation — which in its application to a railroad is the privilege of running it and taking fare and freight — is property, and of the most valuable kind.” And in Morgan v. Louisiana, 93 U. S. 223, it is said that they “ are rights or privileges which are essential to the operations of the corporation, and without which its road and works would be of little value. .. . . They are positive rights or privileges, without the possession of which the road of the company could not be successfully worked. Immunity from taxation is not one of them.” Chesapeake & O. R. Co. v. Miller, 114 U. S. 186; Sterling Gas Co. v. Higby, 134 Ill. 557; Spring Valley Water Works v. Schottler, 62 Cal. 110; Central Pac. R. Co. v. State Board of Equalization, 60 Cal. 35; Veazie Bank v. Fenno, 8 Wall. 547.

We Rave tRe general and paramount provision making francRises taxable. Legislative direction as to tRe manner of valuation is a convenience, ratRer than an absolute necessity, and tRe lack of such direction does not argue tRe absence or suspension of tRe general power to tax. The value of francRises, especially in connection with the property reasonably necessary for tReir exercise and use and which, without tRem would Re of little or no practical value, can be estimated as well as tRe value of otRer subjects of taxation, though perhaps not as readily or with the same degree' of certainty. TRe cardinal requirement is that, as property, they shall be taxed. All else is matter of method and detail. TRe assessors, board of review, and other officers would seem to be competent, under their general powers under the law, to fix their value and extend the tax. TRe legislature, by ch. 285, Laws of 1889, ex industria guarded against any possible implication of exemption of any of the property of street railway corporations. Besides, it is a well-settled principle that an exemption from taxation, to be valid, must be express and clear, beyond reasonable doubt. Cooley, Taxation, 101; Tucker v. Ferguson, 22 Wall. 575; West Wisconsin R. Co. v. Board of Supervisors, 93 U. S. 598; People ex rel. Twenty-third St. R. Co. v. Commissioners of Taxes, 95 N. Y. 554 The suspension or surrender of the power of taxation cannot be implied. Weston v. Shawano Co. 44 Wis. 256. We think it cannot be presumed from the mere failure to indicate detailed directions for valuing and taxing property, however useful or convenient, as against an explicit mandate that it shall be taxed, and when general means and instrumentahties adequate for that purpose exist.

2. At common law, francRises, being incorporeal Reredita-ments, were not subject to seizure and sale on execution; and it has repeatedly been held that the francRises and corporate rights of a quasi public company, and the property vested in it necessary to their use and enjoyment and the accomplishment of the purpose for which the company is created, constitute an entirety, and are not subject to be sold and granted or transferred by any adverse process against it, and that the sale of such property in separate parcels is not permissible, as the result would be to utterly destroy the value of the property of the company for the purpose intended, by severing from the franchises property essential to the useful existence of the company. Gue v. Tide Water C. Co. 24 How. 263. The value of the property of the company consists in the franchises connected with the tangible property, without which the latter would be of little or no value. Hammock v. Loan & Trust Co. 105 U. S. 90; East Ala. R. Co. v. Doe, 114 U. S. 340, 353. The entire property of the corporation, thus considered, is to be regarded and treated as indivisible for the purpose of sale under adverse process, and to permit it to be sold otherwise would defeat the uses impressed on it for public purposes, and which constituted the consideration for the grant of its franchises.

In Yellow River Imp. Co. v. Wood Co. 81 Wis. 560, this subject was fully considered and the authorities collated, with the result in substance as stated; and it was there held that the “ principles mentioned apply with equal force to tax proceedings,” and that “ the rights, privileges, and plant essential to the continued business and purposes of the corporation are not to be severed, broken up, or destroyed, without express legislative authority, but, on the contrary, are to be preserved in their entirety, and for that purpose are deemed segregated from any other property owned by the corporation.” Street Railroad Co. v. Morrow, 87 Tenn. 413; Detroit v. Detroit City R. Co. 76 Mich. 427. In Fond du Lac Water Co. v. Fond du Lac, 82 Wis. 322, the same-principles were applied to the taxation of the property of a water company, in which it was held that all such property of a corporation, within this rule, must be regarded and entered upon the assessment roll and treated throughout for all purposes of taxation, as an entirety; that property not so annexed and necessary to the exercise and enjoyment of the franchises of the corporation might properly be treated and dealt with separately, as in the case of the property of natural persons. In that case the only subject of taxation entered upon the assessment roll was simply certain specified lots, without reference to the works of the company, its mains, pipes, and hydrants, or its corporate rights and franchises, either in detail or as an entirety; and it was held that the assessment must be deemed to be against the lots only, and that the defect could not be remedied by showing in that action that the assessor and board of review in the valuation of the lots included therein the value of the entirety with the franchises of the company. The question of the taxability of the franchises of that company was clearly involved in that case, and expressly affirmed. The principle of these cases was again affirmed in Chicago, M. & St. P. R. Co. v. Milwaukee, 89 Wis. 506, where it was held that the general provisions of the statute concerning the levying and collecting of taxes are to be construed and held as subordinate to the rule against the severance and segregation of property of a quasi public corporation, essential to the continued exercise of its corporate franchises, and that such a result could not be effected without express legislative authority, mere general language in statutes not being held to authorize such a result. We think these cases were rightly decided, and see no reason for departing from the propositions there laid down.

3. Regarding, then, the franchises of the company and the property necessary for their use and exercise and to accomplish the quasi public purposes for which the corporation was created, as an entirety, and its franchises as personal estate for the purposes of taxation, the proper place of assessment of the ¡property as an entirety was the district in which, it had its “ principal office, or place of business.” R. S. secs. 1040, 1041; Milwaukee Steamship Co. v. Milwaukee, 83 Wis. 595.

4. Various methods of taxation of the property of such corporations have been adopted in the different states, depending upon local statutes and systems of taxation, and various views have prevailed as to the legal nature and character of such property. In Hew York, where the construction and operation of street railways in the public streets by authority from the city government is regarded as a new burden, imposed on the abutting lots or property, the right cannot be acquired except by purchase or the exercise of eminent domain, and upon compensation made for it. Street railways are there regarded as real estate. People ex rel. D. & F. R. Co. v. Cassity, 46 N. Y. 46, 49; Craig v. R. C. & B. R. Co. 39 N. Y. 404; Story v. N. Y. E. R. Co. 90 N. Y. 122. In this state such use of the public streets is held not to be a new burden on the property of the lot owner, and may be granted by the public authorities without compensation. Hobart v. Milwaukee C. R. Co. 27 Wis. 194. And the right to use the streets for such purposes is considered as a franchise granted on behalf of the state by the local authorities. State ex rel. Att'y Gen. v. Madison St. R. Co. 72 Wis. 619. We think, therefore, that the tangible property, such as cars, raffs, poles, wires, etc., used in connection with the franchises of the company, as well as the franchises, may be properly regarded for the purpose of taxation as personalty; and, as such, that it is subject to assessment in the assessment district where the company has its principal office or place of business. In State ex rel. St. P. C. R. Co. v. District Court, 31 Minn. 354, 358, the portion of a track of the city railway in a public street was held not to be realty within the meaning of the laws authorizing assessments for paving. And in Booth on Street Railway Law, sec. 272, it is said that, “ to arrive' at the valuation of a street railway for the purposes of taxation, the proper method is to assess it as a whole, including as items of value its franchises, right of way, rails, sleepers, ties, and other fixtures,” and in Detroit v. Detroit C. R. Co. 76 Mich. 421, it was held that the right to use street railway tracks is inseparable from the franchises; and, not being taxable as land, it should properly be taxable as an entirety in one place, so far as within one city. Street Railroad Co. v. Morrow, 87 Tenn. 406.

For these reasons, we do not think the property upon which the assessment complained of was made can be regarded as within the statute defining “ real property,” “ real estate,” and “land,” for the purposes of taxation. It certainly is not land itself, nor is it either “ buildings, fixtures, improvements, rights, or privileges appertaining thereto.” R. S. sec. 1035. It does not belong to the owner of the soil or to the city representing the public in the easement over it for the purpose of travel, but it pertains to the franchise of the company, and belongs to the company. The utter impracticability, not to say impossibility, of treating it as real estate for the purposes of taxation, is illustrated, not only from the results that might follow tax sales, but in attempting to assess it as such under the provision that “ all real property not expressly exempt from taxation shall be entered upon the assessment roll in the assessment district where it lies” (R. S. sec. 1039), and is well illustrated by the present case, where the property claimed to be real estate has a physical location in twenty-one assessment districts. IIow could it be entered on the rolls by lots and blocks, or by reference to plat or deed, or how otherwise, under secs. 1045 and 1046 ? It is part on and part in the soil, and part in the air. IIow are the twenty-one assessors to assess and value the tracks, ties, poles, trolley wires, etc., with certainty and in an intelligible manner in so many parcels? And are the twenty-one assessments to be followed by as many separate taxes and tax sales in case of nonpayment? It seems to ns entirely clear that this property cannot be regarded as real estate for the purposes of taxation, and that it is not the “land” and “real property” described in these sections for assessment and taxation; and, as already stated, it seems perfectly plain from the statute (sees. 1034, 1038, R. S.; ch. 285, Laws of 1889) that this property is required by law to be assessed and taxed.

As held in People ex rel. Twenty-third St. R. Co. v. Commissioners of Taxes, 95 N. Y. 554, 558, the general purpose of the statutes relating to assessment and taxation is, to secure an assessment of all property, real and personal, at its actual value; and they are to be construed and enforced with this purpose in view. In view of the use made of the specific lots upon which the power houses are situated, and upon a fair construction of the statute, and with a view to carry out its evident meaning, we hold that such real estate, thus devoted to such uses, is not. the real property required 'by sec. 1039 to be “ entered upon the assessment roil in the assessment district where it lies; ” it having acquired a peculiar character in the law by reason of having become a part of the entirety of a property subject only to assessment and taxation as an entirety in the assessment district where the corporation owning it has its principal office and place of business. The argument was made that as the real property on which the power houses were situated, by the terms of the statute, could not be assessed in the Third ward or assessment district, so as to enable an assessment of the property of the company in its entirety to be made in that district, therefore neither its franchises nor the material . and tangible property necessary to their use could be taxed at all. We cannot see that, by a proper construction of the various provisions of the statutes cited, any such conclusion would follow. Certainly, no such result can be fairly said ■to have been intended. On the contrary, we think it is reasonably clear, in view of the rule requiring such property to be assessed and taxed as an entirety, that all real property constituting a part thereof by reason of the premises - becomes taxable as a part of such entirety and in the assessment district where the company has its principal office or-place of business. This view derives added force from ch. • 285, Laws of 1889, under which it was clearly intended that all the property of such companies should be taxed. There-is an appropriate officer to assess and value it, and a proper board to review the assessment, and all the appropriate-agencies to carry out and collect the tax.

5. It is apparent from the record that in making this assessment the rule laid down in the case of Fond du Lac Water Co. v. Fond du Lac, 82 Wis. 322, was not pursued. The present case presented difficulties and embarrassments. which did not exist in the case cited, where the city constituted a single assessment district. The result of the course-pursued is that the lots and power house or houses, or such as is or are reasonably necessary to the use and exercise of' the franchises of the railway company, have not been assessed as they should have been, with and as a part of the entirety, in compliance with the rule established in this state on that subject; and the assessment was therefore void and was rightly set aside.

6. The board of review which might have corrected any defect in the assessment in question is not a permanent, body, but has been dissolved and has lost all control over-the assessment in question; and, as the duty of the court, on certiorari is limited to either an affirmance or reversal. of the assessment, it follows that the judgment of the circuit court setting aside the assessment must be affirmed.

7. The objection that the provision that the rule of taxar - tion shall be uniform (sec. 1, art. VIII, Const.) was violated by the provisions of the city charter in respect to the method] of electing city assessors by the mayor and common council upon the recommendation of the tax commissioner, instead; of by a Yote of tbe electors, and making suck tax commissioner, appointed by the mayor and confirmed by the common council, a member of the board of review with the assessor, mayor, and city clerk (City Charter — Laws of 1874, ch. 184 — subch. 18, secs. 2, 6, 12), is not well taken. There can be no doubt that the assessors and tax commissioner were legally appointed, and there was no constitutional objection to the creation of the office of tax commissioner of the city of Milwaukee, and to making him a member of the board of review. The constitutional rule is not violated by diversity of methods of electing or appointing assessors in the several cities, or in the constitution of their respective boards of review. The uniform rule is complied with in this respect if property is assessed by assessors properly elected or appointed, and the assessment is reviewed by a board of review elected or appointed in conformity with sec. 9, art. XIII, Const. R. S. sec. 1030. These provisions of the charter in question were a general law amending the former charter, and were a grant of corporate power to the city, and not a special act for the assessment or collection of taxes, within the meaning of the sixth clause of sec. 31, art. IV of the constitution. State ex rel. Hamilton v. Krez, 88 Wis. 137; Clark v. Janesville, 10 Wis. 136; Warner v. Knox, 50 Wis. 431; Cathcart v. Comstock, 56 Wis. 613.

A motion for a rehearing was denied September 26, 1895..

By the Court.— The judgment of the circuit court is affirmed.