James C. Carter and Lawrence Maxwell, for the petition.
Mr. Justice BREWER delivered the opinion of the court.
We have had before us at the present term several cases involving the taxation of the property of express companies, some coming from Ohio, some from Indiana, and one from Kentucky; also a case from the latter state involving the taxation of the property of the Henderson Bridge Company. The Ohio and Indiana cases were decided on the 1st of February. 165 U.S. 1974 , 17 Sup. Ct. 305. Petitions for rehearing of those cases have been presented, and are now before us for consideration.
The importance of the questions involved, the close division [166 U.S. 185, 218] in this court upon them, and the earnestness of counsel for the express companies in their original arguments, as well as in their briefs on this application, lead those of us who concurred in the judgments to add a few observations to what has hitherto been said.
Again and again has this court affirmed the proposition that no state can interfere with interstate commerce through the imposition of a tax, by whatever name called, which is in effect a tax for the privilege of transacting such commerce; and it has as often affirmed that such restriction upon the power of a state to interfere with interstate commerce does not in the least degree abridge the right of a state to tax at their full value all the instrumentalities used for such commerce.
Now, the taxes imposed upon express companies by the statutes of the three states of Ohio, Indiana, and Kentucky are certainly not in terms 'privilege taxes.' They purport to be upon the property of the companies. They are therefore not, in form at least, subject to any of the denunciations against privilege taxes which have so often come from this court. The statutes grant no privilege of doing an express business, charge nothing for doing such a business, and contemplate only the assessment and levy of taxes upon the property of the express companies situated within the respective states; and the only really substantial question is whether, properly understood and administered, they subject to the taxing power of the state property not within its territorial limits. The burden of the contention of the express companies is that they have within the limits of the state certain tangible property, such as horses, wagons, etc.; that that tangible property is their only property within the state; that it must be valued as other like property, and upon such valuation alone can taxes be assessed and levied against them.
But this contention practically ignores the existence of intangible property, or, at least, denies its liability for taxation. In the complex civilization of to-day, a large portion of the wealth of a community consists in intangible property, and there is nothing in the nature of things or in the limitations of the federal constitution which restrains a state from tax- [166 U.S. 185, 219] ing at its real value such intangible property. Take the simplest illustration: B., a solvent man, purchases from A. certain property, and gives to A. his promise to pay, say, $100,000 therefor. Such promise may or may not be evidenced by a note or other written instrument. The property conveyed to B. may or may not be of the value of $100,000. If there be nothing in the way of fraud or misrepresentation to invalidate that transaction, there exists a legal promise on the part of B. to pay A. $ 100,000. That promise is a part of A.'s property. It is something of value, something on which he will receive cash, and which he can sell in the markets of the community for cash. It is as certainly property, and property of value, as if it were a building or a steamboat, and is an justly subject to taxation. It matters not in what this intangible property consists,-whether privileges, corporate franchises, contracts, or obligations. It is enough that it is property which, though intangible, exists, which has value, produces income, and passes current in the markets of the world. To ignore this intangible property, or to hold that it is not subject to taxation at its accepted value, is to eliminate from the reach of the taxing power a large portion of the wealth of the country. Now, whenever separate articles of tangible property are joined together, not simply by a unity of ownership, but in a unity of use, there is not infrequently developed a property, intangible though it may be, which in value exceeds the aggregate of the value of the separate pieces of tangible property. Upon what theory of substantial right can it be adjudged that the value of this intangible property must be excluded from the tax lists, and the only property placed thereon be the separate pieces of tangible property?
The first question to be considered, therefore, is whether there is bolonging to these express companies intangible property,-property differing from the tangible property; a property created by either the combined use or the manner or use of the separate articles of tangible property, or the grant or acquisition of franchises or privileges, or all together. To say that there can be no such intangible property, that it is [166 U.S. 185, 220] something of no value, is to insult the common intelligence of every man. Take the Henderson Bridge Company's property, the validity of the taxation of which is before us in another case. The facts disclosed in that record show that the bridge company owns a bridge over the Ohio, between the city of Henderson, in Kentucky, and the Indiana shore, and also 10 miles of railroad in Indiana; that that tangible property-that is, the bridge and railroad track-was assessed in the states of Indiana and Kentucky at $1, 277,695.54, such, therefore, being the adjudged value of the tangible property. Thus, the physical property could presumably be reproduced by an expenditure of that sum, and if placed elsewhere on the Ohio river, and without its connections or the business passing over it or the franchises connected with it, might not of itself be worth any more. As mere bridge and tracks, that was its value. If the state's power of taxation is limited to the tangible property, the company should only be taxed in the two states for that sum; but it also appears that it, as a corporation, had issued bonds to the amount of $2,000,000, upon which its was paying interest; that it had a capital stock of $1,000,000; and that the shares of that stock were worth not less than $90 per share in the market. The owners, therefore, of that stock, had property which, for purposes of income and purposes of sale, was worth $2,900,000. What gives this excess of value? Obviously, the franchises, the privileges the company possesses,- its intangible property.
Now, it is a cardinal rule, which should never be forgotten, that whatever property is worth for the purposes of income and sale it is also worth for purposes of taxation. Suppose such a bridge were entirely within the territorial limits of a state, and it appeared that the bridge itself cost only $1,277,000, could be reproduced for that sum, and yet it was so situated with reference to railroad or other connections, so used by the traveling public, that it was worth to the holders of it, in the matter of income, $2,900,000, could be sold in the markets for that sum, was therefore in the eyes of practical business men of the value of $2,900,000, can there be any doubt of the state's power to assess it at that sum, [166 U.S. 185, 221] and to collect taxes from it upon that basis of value? Substance of right demands that, whatever be the real value of any property, that value mat be accepted by the state for purposes of taxation, and this ought not to be evaded by any mere confusion of words. Suppose an express company is incorporated to transact business within the limits of a state, and does business only within such limits, and, for the purpose of transacting that business, purchases and holds a few thousands of dollars' worth of horses and wagons, and yet it so meets the wants of the people dwelling in that state, so uses the tangible property which it possesses, so transacts business therein, that its stock becomes in the markets of the state of the actual cash value of hundreds of thousands of dollars. To the owners thereof, for the purposes of income and sale, the corporate property is worth hundreds of thousands of dollars. Does substance of right require that it shall pay taxes only upon the thousands of dollars of tangible property which it possesses? Accumulated wealth will laugh at the crudity of taxing laws which reach only the one, and ignore the other; while they who own tangible property, nor organized into a single producing plant, will feel the injustice of a system which so misplaces the burden of taxation.
A distinction must be noticed between the construction of a state law and the power of a state. If a statute, properly construed, contemplates only the taxation of horses and wagons, then those belonging to an express company can be taxed at no higher value than those belonging to a farmer. But, if the state comprehends all property in its scheme of taxation, then the good will of an organized and established industry must be recognized as a thing of value. The capital stock of a corporation and the shares in a joint-stock company represent not only the tangible property, but also the intangible, including therein all corporate franchises and all contracts, privileges, and good will of the concern.
Now, the same reality of the value of its intangible property exists when a company does not confine its work to the limits of a single state. Take, for instance, the Adams Express Company. According to the return filed by it with the audi- [166 U.S. 185, 222] tor of the state of Ohio, as shown in the records of these cases, its number of shares was 120,000, the market value of each $140 to $150. Taking the smaller sum gives the value of the company's property taken as an entirety as $16,800,000. In other words, it is worth that for the purposes of income to the holders of the stock, and for purposes of sale in the markets of the land. But in the same return it shows that the value of its real estate in Ohio was only $25,170, of real estate owned outside of Ohio $3,005,157.52, or a total of $3,030,327.52; the value of its personal property in Ohio $42,065, of personal property outside of Ohio $1, 117,426.25, or a total of $1,159,491.05,-making a total valuation of its tangible property $4,189,818.57; and upon that basis it insists that taxes shall be levied. But what a mockery of substantial justice it would be for a corporation whose property is worth to its stockholders, for the purposes of income and sale, $16,800,000, to be adjudged liable for taxation upon only one-fourth of that amount. The value which property bears in the market, the amount for which its stock can be bought and sold, is the real value. Business men do not pay cash for property in moonshine or dreamland. They buy and pay for that which is of value in its power to produce income, of for purposes of sale.
It is suggested that the company may have bonds, stocks, or other investments which produce a part of the value of its capital stock, and which have a special situs in other states or are exempt from taxation. If it has, let it show the fact. Courts deal with things as they are, and do not determine rights upon mere possibilities. If half of the property of the Adams Express Company, which by its own showing is worth $16,000,000 and over, is invested in United States bonds, and therefore exempt from taxation, or invested in any way outside the business of the company, and so as to be subject to purely local taxation, let that fact be disclosed; and then, if the state of Ohio attempts to include within its taxing power such exempted property, or property of a different situs, it will be time enough to consider and determine the rights of the company. That, if such facts exist, they must be taken into consideration by a state in its proceedings under such [166 U.S. 185, 223] tax laws as are here presented, has been heretofore recognized and distinctly affirmed by this court. Railway Co. v. Backus, 154 U.S. 421, 443 , 14 S. Sup. Ct. 1114; Telegraph Co. v. Taggart, 163 U.S. 1, 23 , 16 S. Sup. Ct. 1054; Adams Exp. Co. v. Ohio, 165 U.S. 194, 227 , 17 S. Sup. Ct. 305. Presumably, all that a corporation has is used in the transaction of its business; and, if it has accumulated assets which for any reason affect the question of taxation, it should disclose them. It is called upon to make return of its property, and if its return admits that it is possessed of property of a certain value, and does not disclose anything to show that any portion thereof is not subject to taxation, it cannot complain if the state treats its property as all taxable.
But where is the situs of this intangible property? The Adams Express Company has, according to its showing, in round numbers $4,000,000 of tangible property scattered through different states, and, with that tangible property thus scattered, transacts its business. By the business which it transacts, by combining into a single use all these separate pieces and articles of tangible property, by the contracts, franchises, and privileges which it has acquired and possesses, it has created a corporate property of the actual value of $16,000,000. Thus, according to its figures, this intangible property, its franchises, privileges, etc., is of the value of $12,000,000, and its tangible property of only $4,000, 000. Where is the situs of this intangible property? Is it simply where its home office is, where is found the central directing thought which controls the workings of the great machine, or in the state which gave it its corporate franchise; or is that intangible property distributed wherever its tangible property is located and its work is done? Clearly, as we think, the latter. Every state within which it is transacting business, and where it has it property, more or less, may rightfully say that the $16,000,000 of value which it possesses springs not merely from the original grant of corporate power by the state which incorporated it, or from the mere ownership of the tangible property, but it springs from the fact that that tangible property it has combined with contracts, franchises, and privileges into a single [166 U.S. 185, 224] unit of property; and this state contributes to that aggregate value not merely the separate value of such tangible property as is within its limits, but its proportionate share of the value of the entire property. That this is true is obvious from the result that would follow if all the states other than the one which created the corporation could and should withhold from it the right to transact express business within their limits. It might continue to own all its tangibie property within each of those states, but, unable to transact the express business within their limits, that $12,000,000 of value attributable to its intangible property would shrivel to a mere trifle.
It may be true that the principal office of the corporation is in New York, and that for certain purposes the maxim of the common law was, 'Mobilia personam sequuntur;' but that maxim was never of universal application, and seldom interfered with the right of taxation. Car Co. v. Pennsylvania, 141 U.S. 18, 22 , 11 S. Sup. Ct. 876. It would certainly seem a misapplication of the doctrine expressed in that maxim to hold that, by merely transferring its principal office across the river to Jersey City, the situs of $12,000,000 of intangible property, for purposes of taxation, was changed from the state of New York to that of New Jersey.
It is also true that a corporation is, for purposes of jurisdiction in the federal courts, conclusively presumed to be a citizen of the state which created it; but it does not follow therefrom that its franchise to be is for all purposes to be regarded as confined to that state. For the transaction of its business it goes into various states, and wherever it goes as a corporation it carries with it that franchise to be. But the franchise to be is only one of the franchises of a corporation. The franchise to do is an independent franchise, or rather a combination of franchises, embracing all things which the corporation is given power to do; and this power to do is as much a thing of value and a part of the intangible property of the corporation as the franchise to be. Franchises to do go wherever the work is done. The Southern Pacific Railway Company is a corporation chartered by the state of Kentucky; yet, within the limits of that state, it is said to have no tangible [166 U.S. 185, 225] PROPERTY, AND NO OFFICE FOR THE TRANSACTIon of business. the vast amount of tangible property which, by lease or otherwise, it holds and operated, and all the franchises to do which it exercises, exist and are exercised in the states and territories on the Pacific slope. Do not these intangible properties,-these franchises to do,-exercised in connection with the tangible property which it holds, create a substantive matter of taxation to be asserted by every state in which that tangible property is found?
It is said that the views thus expressed open the door to possibilities of gross injustice to these corporations, through the conflicting action of the different states in matters of taxation. That may be so, and the courts may be called upon to relieve against such abuses. But such possibilities do not equal the wrong which sustaining the contention of the appellant would at once do. In the city of New York are located the headquarters of a corporation whose corporate property is confessedly of the value of $16,000,000,-a value which can be realized by its stockholders at any moment they see fit. It tangible property and its business are scattered through many states, all whose powers are invoked to protect its property from trespass, and secure it in the peaceful transaction of its widely dispersed business. Yet, because that tangible property is only $4,000,000, we are told that that is the limit of the taxing power of these states. In other words, it asks these states to protect property which to it is of the value of $16,000,000, but is willing to pay taxes only on the basis of a valuation of $4,000,000. The injustice of this speaks for itself.
In conclusion, let us say that this is eminently a practical age; that courts must recognize things as they are, and as possessing a value which is accorded to them in the markets of the world; and that no finespun theories about situs should interfere to enable these large corporations, whose business is carried on through many states, to escape from bearing in each state such burden of taxation as a fair distribution of the actual value of their property among those states requires.
The petition for a rehearing is denied.