[218 U.S. 551, 552] Messrs. Edmund F. Trabue Blewett Lee, John C. Doolan, and Attilla Cox, Jr., for plaintiff in error.
[218 U.S. 551, 555] Messrs. T. L. Edelen, James Breathitt, Robert B. Franklin, and Clem J. Whittemore for defendant in error.
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 [218 U.S. 551, 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, 108 S. W. 245. The Illinois Central Company petitioned for a rehearing, and presented the Federal questions now urged under the 14th 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 14th 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 , 45 L. ed. 1015, 21 Sup. Ct. Rep. 730, 15 Am. Crim. Rep. 241; Leigh v. Green, 193 U.S. 85 , 48 L. ed. 626, 24 Sup. Ct. Rep. 390.
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 [218 U.S. 551, 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 [218 U.S. 551, 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. 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 R. Co. v. Coulter, 113 Ky. 657, 68 S. W. 873. 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 [218 U.S. 551, 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 inclosing 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. 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:
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 as sessment 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 , 682-684; 42 L. ed. 622, 625, 626, 18 Sup. Ct. Rep. 229; Witherspoon v. Duncan, 4 Wall. 210, 18 L. ed. 339.
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 [218 U.S. 551, 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:
And on the petition for rehearing, the court added this statement:
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 , 16; 48 L. ed. 596, 597, 24 Sup. Ct. Rep. 318; First Nat. Bank v. Kentucky, 9 Wall. 353, 19 L. ed. 701.
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 [218 U.S. 551, 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.