Santa Fe Pac. R.R. Co. v. Lane, 244 U.S. 492 (1917)

The land grant was made in aid of the construction of a proposed railroad from Missouri through Arizona to the Pacific Ocean, and included, subject to exceptions not here material, every alternate odd-numbered section of public land within defined limits on either side of the road. p. 494The lands along the proposed road had not been surveyed at the date of the grant, but the President was to cause them to be surveyed as the construction proceeded; and as each twenty-five miles of road was completed patents were to be issued for the granted lands lying opposite that section. The grant was made upon condition that construction be commenced within two years and that not less than fifty miles of road be completed during each year thereafter; and the granting act was declared to be subject to addition, alteration, amendment or repeal by Congress, due regard being had for the rights of the grantee. Although expressly contemplating that the granted lands should be surveyed along with the other lands on each side of the road, the granting act said nothing about who should bear the cost of the survey. At first the grantee did not proceed with the construction at the rate prescribed (Atlantic & Pacific R. R. Co. v. Mingus, 165 U. S. 413, 442; House Report No. 193, 49th Cong., 1st sess.), and during the continuance of this default Congress incorporated in the appropriation act of July 31, 1876, c. 246,19 Stat. 121, a provision requiring the grantee, as also other similar grantees, to pay for the survey of the granted lands and directing that this be done in advance of the issue of the patents. This provision, it is contended, infringed upon the vested rights of the grantee and therefore was repugnant to the due process of law clause of the Fifth Amendment to the Constitution. But in view of the grantee’s default and the reserved power to add to, alter, amend or repeal the granting act, the contention must be held untenable. This necessarily follows from the decisions in Northern Pacific R. R. Co. v. Traill County, 115 U. S. 600, and New Orleans Pacific Ry. Co. v. United States, 124 U. S. 124.

Under the rectangular system of surveying the public lands, which long has been in force, they are divided into townships and sections bounded by north and south and p. 495east and west lines. A township consists of thirty-six sections—each approximately one mile square—arranged in six rows and progressively numbered by starting with the northeasterly one and proceeding west through the upper row, then east through the second row and then alternately west and east through the others. Rev. Stats., § 2395. A township has the same number of odd-numbered sections that it has of even-numbered ones and the two are so arranged that they alternate just as do the different colored squares on a checker board. The only hues run in the course of the survey are the township lines and the exterior section lines and the only monuments erected or placed are those which mark these lines. Every section line is a boundary between two sections, one having an odd and the other an even number. A township cannot be divided until its exterior lines are established, and the lines of the alternate odd-numbered sections cannot be established without at the same time and by the same acts establishing the lines of the even-numbered sections. In short, the system is such that a township is surveyed as a unit.

With this surveying system in mind, the officers of the Land Department construed the provision of 1876 as intended to charge the grantee with the cost of surveying the granted lands, and not with the cost of surveying the township. A plan for dividing the cost on an acreage basis between the granted and the ungranted lands was accordingly adopted. By it, if the granted lands constituted half the total area, as they would where all the odd-numbered sections passed under the grant, the grantee was charged with half the total cost. This plan was followed uniformly as to all the land grants coming within the purview of that provision up to the passage of the Act of June 25, 1910, supra. Of the terms of this act it suffices to say in this connection that it requires the cost of surveying the “lands granted” to be deposited within ninety p. 496days after a demand by the Secretary of the Interior specifying the amount required and the lands to be surveyed. It makes no other change in the duty or obligation of the grantee. In other words, what is to be paid remains the same as before, but the time for payment is advanced. Following this act the officers of the Land Department adhered to the view that the cost to be paid was that of surveying the granted lands and continued to divide the cost of surveying the township according to the plan previously adopted, save as a different course was pursued in this and possibly a few other instances.

The construction which the officers of the Land Department placed upon the provision of 1876, if not the only permissible one, was obviously both reasonable and equitable. Their uniform adherence to it for over thirty years prior to the Act of 1910 gave it additional force, and when Congress, with undoubted knowledge of what had been done, chose, as it did in passing that act, to leave the terms of the former provision undisturbed, save as the time for payment was advanced, the departmental construction received a further sanction which, in effect, incorporated it into the statute. Convincing evidence p. 497that Congress took the same view of the matter as did the officers of the Land Department, is afforded by the committee reports on the Act of 1910 wherein the grantees in the land grants were spoken of as under an existing duty “to pay one-half the cost of surveying the lands within their granted limits” and the Secretary of the Interior was encouraged to call upon Congress “for a sufficient appropriation, from time to time, to cover the Government’s share of the cost of the work of surveying as it progressed.” See Senate Report No. 609, 61st Cong., 2d sess., which includes the House Report. One of the reports, in evident explanation of provisions in the act intended to hasten such surveys, said:

We think the other elements are not wanting. There p. 498are millions of acres of unsurveyed lands within the primary limits of the unforfeited portion of the grant of 1866. (See Senate Report, supra.) The plaintiff is entitled to many of the odd-numbered sections within the unsurveyed areas. A claim such as is evidenced by the demand made by the defendant, unless and until it is adjudged unauthorized, will cast a serious cloud upon the plaintiff’s rights in the granted lands remaining unsurveyed and be a source of serious embarrassment. Besides, the Act of 1910 contemplates that when a demand thereunder is not complied with the rights of the grantee in the granted lands specified in the demand “ shall cease and forfeit” to the United States and the Secretary shall notify the Attorney General in order that the latter may begin “proceedings to declare the forfeiture” and to restore the lands to the public domain. The plaintiff was not required in order to test the validity of the demand to permit the ninety days to pass and to rely entirely upon defending such suit as might be brought by the Attorney General. On the contrary, if the demand was unlawful, as we hold it was, the plaintiff was entitled to sue in equity to have the defendant enjoined from insisting upon or giving any effect to it. The hazard and embarrassment incident to any other course were such as to entitle it to act promptly and affirmatively, and of course there was no remedy at law that would be as plain, adequate and complete as a suit such as this against the defendant.

Under the so-called franchise tax provisions of Kentucky (Ky. Stats., §§ 4077-4079) relating to railroad and other corporations exercising special or exclusive privileges or franchises, what is termed the “ capital stock of the corporation” (§ 4079) includes its entire property, p. 500tangible and intangible, and what is termed a "franchise tax” is nothing else than a tax upon the intangible property of the corporation in Kentucky.

These are companion cases involving similar questions, were argued together, and may be disposed of in a single p. 502opinion. Appellees are corporations organized under the laws of the State of Kentucky, one of which (the Louisville & Interurban Railroad Company) operates, as a common carrier, passenger and freight lines of railroad in three of the counties of that State and in various municipalities and taxing districts in those counties; while the other (the Louisville Railway Company) operates, as a common carrier, passenger and freight lines of street railway in the City of Louisville and in Jefferson County outside of that city. They filed their several bills of complaint in the District Court against Henry M. Bosworth and others, then constituting the Board of Valuation and Assessment of the State of Kentucky (Bosworth being also Auditor of Public Accounts), and against the Attorney General of the State and his assistants, suing them all both individually and in their official capacities, for an injunction to restrain steps looking to the certification and enforcement of what are called “franchise taxes” attempted to be assessed upon the respective complainants for the year 1915 under § 4077 and succeeding sections of the Kentucky Statutes, upon the ground of discrimination in the valuation of the franchises; they having been assessed, as alleged, on the basis of 75 per cent, of actual values, while taxable property in general was assessed systematically and intentionally at not more than 52 per cent, of actual values. There being no diversity of citizenship, the jurisdiction of the District Court was invoked, under the first paragraph of § 24, Jud. Code, upon the ground that the suits arose under the “due process” and “equal protection” clauses of the Fourteenth Amendment of the Constitution of the United States and that the matter in dispute in each case was in excess of the jurisdictional amount. Plaintiffs also relied upon certain provisions of the constitution of the State that require uniform taxation of property according to value and at the same rate for corporate as for individual property. By supplemental bills p. 503the successors in office of the original defendants were made parties, in both their individual and official capacities. In each case there was a motion to dismiss, equivalent to a general demurrer to the bill, upon the following grounds: (1) That there was no federal question involved, and therefore the court was without jurisdiction; (2) that the bills stated no cause of action under the laws of the State or of the United States; (3) that the plaintiffs had an adequate remedy at law; (4) that the bills showed no equity on their face; and (5) that the suits were suits against the State of Kentucky. After a hearing, the court overruled these motions, defendants declined to plead further and made no objection to the submission of the cases for final decrees, the allegations of the bills not being denied were taken as true, and final decrees were made granting relief against the enforcement of the disputed assessments, and restrainingv the imposition of franchise taxes upon plaintiffs for the year 1915 based on assessments of their franchises at greater values than those conceded in the respective bills of complaint, which were 60 per cent, of actual values. The court, in reaching this conclusion, followed its own previous decisions in Louisville & N. R. Co. v. Bosworth, 209 Fed. Rep. 380; 230 Fed. Rep. 191. Defendants appealed directly to this court, under § 238, Jud. Code.

The bills are substantially identical in form, and an outline of the one filed by the Louisville & Interurban Railroad Company (No. 617) will suffice. Following a prefatory statement of jurisdictional matters and a p. 504description of the parties, it avers in substance that the State Board of Valuation and Assessment, having ascertained by a process not here criticised what, in their judgment, was the fair cash value of plaintiff’s u capital stock,” took 75 per cent, of the result, and thus fixed the valuation of the capital stock for the purposes of the assessment for the year 1915 at $2,250,000; deducted therefrom the amount of plaintiff’s tangible property assessed for state taxes—$813,619—thus fixing the value of the ufranchise” at $1,436,381; and ascertained the state taxes thereon as follows: state tax, generally, at 50 cents, $7,181.90; state road tax, at 5 cents, $718.19; a total of $7,900.09. That plaintiff protested, but to no avail. That the assessment subjects plaintiff to state taxes upon the whole of its capital stock, and to county taxes in the three counties on proportionate parts of it, and to additional taxes in the cities and other municipalities and taxing districts through which its railroad rims. Plaintiff avers that for many years past, including the taxing year 1914-1915, the taxes for which are here in controversy, the local assessors and other assessing officers of the State of Kentucky have habitually, intentionally, systematically, and generally assessed the property of individuals and of corporations within their sphere of duty, comprising 80 per cent, of the total taxable property, at not exceeding 52 per cent, of its fair cash value, estimated at the price which it would bring at a fair and voluntary sale; that the fact of such systematic assessment upon that basis annually for many years past has been a matter of public notoriety in the State; “ whereas the said Bosworth, Rhea and Crecilius, acting as the State Board of Valuation and Assessment, after ascertaining what, in their judgment, was the fair cash value of plaintiff’s capital stock, reduced said value only to the extent of taking 75 per cent, thereof, instead of taking 52 per cent., the average rate applied by assessing officers to the vast body of property in this State.” It is p. 505averred that Bosworth, Rhea and Crecilius have denied to plaintiff the benefit of equalization, and that thereby plaintiff has been deprived of its property without due process of law, and denied the equal protection of the laws, in violation of the Fourteenth Amendment and the constitution and laws of the State; that plaintiff has paid the state and county taxes upon its tangible property for the year in controversy so far as they have been demanded, and also has paid the state taxes upon its franchise as arrived at by taking the value of its capital stock and taking 60 per cent, of such valuation and deducting therefrom the valuation of plaintiff’s tangible property; that Bosworth, Rhea, and Crecilius, unless enjoined, will certify to the county clerks of the three counties mentioned the amounts claimed to be due to said counties and the taxing districts thereof by reason of the valuation they have assumed to make as above stated; the county clerks will thereupon certify said assessments respectively to the tax collectors for the said counties and the taxing districts therein for collection; and said collecting officers will proceed to make collections and to institute unwarranted, vexatious, and multitudinous suits and proceedings at law against plaintiff; that unless enjoined the said Bosworth or his deputy will enter in account with the Treasurer of the State the amount of taxes based upon the valuation aforesaid, and the said Attorney General and his assistants will institute civil or penal actions or procure indictments against plaintiff based upon its supposed delinquency in the payment of taxes; and that the unauthorized and illegal valuation constitutes a cloud and, as claimed by defendants, constitutes a lien upon plaintiff’s property in the Commonwealth, and unless defendants are enjoined numerous and vexatious suits will be instituted to enforce or foreclose such lien. There is an appropriate prayer for injunction and for general relief.

It does not appear, from any express averment in the p. 506bills, that other property-owners have been subjected to discrimination precisely like that of which plaintiffs complain; but the entire argument for defendants, in these cases and others argued with them, proceeds upon the theory that the Board of Valuation and Assessment treated all taxpayers alike over whom they had jurisdiction; hence, it is fair to assume that plaintiffs’ franchises were assessed on the same basis of valuation applied by the Board to other property generally that came within the range of their official duty.

(4) Taking up first the question of state law, we should at the outset briefly consider the pertinent provisions of the constitution and laws of the State. By § 171 of the constitution it is prescribed: “The General Assembly shall provide by law an annual tax, which, with other resources, shall be sufficient to defray the estimated expenses of the Commonwealth for each fiscal year. Taxes shall be levied and collected for public purposes only. They shall be uniform upon all property subject to taxation within the territorial limits of the authority levying the tax; and all taxes shall be levied and collected by general laws.” By § 172: “All property, not exempted from taxation by this Constitution, shall be assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale; and any officer, or other person authorized to assess values for taxation, who shall commit p. 509any willful error in the performance of his duty, shall be deemed guilty of misfeasance, and upon conviction thereof shall forfeit his office, and be otherwise punished, as may be provided by law.” By § 174: “All property, whether owned by natural persons or corporations, shall be taxed in proportion to its value, unless exempted by this Constitution; and all corporate property shall pay the same rate of taxation paid by individual property. Nothing in this Constitution shall be construed to prevent the General Assembly from providing for taxation based on income, licenses or franchises.” Section 181 provides as follows: “The General Assembly may, by general laws only, provide for the payment of license fees on franchises, stock used for breeding purposes, the various trades, occupations and professions, or a special or excise tax;” etc. And § 182 declares: “Nothing in this Constitution shall be construed to prevent the General Assembly from providing, by law, how railroads and railroad property shall be assessed and how taxes thereon shall be collected.”

Under statutory provisions, property is valued for purposes of taxation, both state and local, in the following manner: All property in the State, real and personal, tangible and intangible, except the property of railroads, the franchises of certain corporations, shares of stock in banks, and distilled spirits, is assessed by county assessors, subject to the review of county boards of supervisors and a State Board of Equalization. Tangible railroad property is assessed by the State Railroad Commission. Bank shares and distilled spirits are assessed by the Board of Valuation and Assessment, composed of the Auditor of Public Accounts, the Treasurer of State, and the Secretary of State. And, by § 4077, Ky. Stats., it is provided: “Every railway company or corporation . . . also every other corporation, company or association having or exercising any special or exclusive privilege or franchise not allowed by law to natural persons, or performing any p. 510public service, shall, in addition to the other taxes imposed on it by law, annually pay a tax on its franchise to the State, and a local tax thereon to the county, incorporated city, town or taxing district, where its franchise may be exercised.” The values of such franchises (except as to turnpike companies, otherwise provided for), are to be fixed by the Board of Valuation and Assessment. By § 4078, verified statements are to be delivered annually to the Auditor showing certain facts respecting the company, including the amount of capital stock, with its par and real value, and the highest price at which it was sold within twelve months preceding, the amount of surplus funds and undivided profits, the value of all other assets, the amount of indebtedness, the gross or net earnings or income, the amount and kind of tangible property in the State, the fair cash value thereof estimated at the price it would bring at a fair voluntary sale, and such other facts as the Auditor may require. Section 4079 provides that “where the line or lines of any such corporation, company or association extend beyond the limits of the State or county,” the statement shall, in addition to other facts, show the length of entire lines operated, owned, leased or controlled in the State and in each county, incorporated city, town, or taxing district, and the entire line operated, etc., elsewhere. There is a proviso that the Board, from the statement furnished to it by the corporation, and from such other evidence as it may have, is to “fix the value of the capital stock of the corporation . . . and from the amount thus fixed shall deduct the assessed value of all tangible property assessed in this State, or in the counties where situated. The remainder thus found shall be the value of its corporate franchise subject to taxation as aforesaid.” 1 It has been held by the Kentucky Court of p. 511Appeals, and by this court, that the “capital stock of the corporation,” here referred to, includes its entire property, of every kind and description, tangible and intangible, and that what is called a “ franchise tax” is nothing else than a tax upon the intangible property of the company in Kentucky. Henderson Bridge Co. v. Commonwealth, 99 Kentucky, 623, 639, 641; Henderson Bridge Co. v. Kentucky, 166 U. S. 150, 154; Adams Express Co. v. Kentucky, 166 U. S. 171, 180; Louisville Tobacco Warehouse Co. v. Commonwealth, 106 Kentucky, 165, 167 ; Marion National Bank v. Burton, 121 Kentucky, 876, 888. In view of these decisions, no serious attempt is made to sustain the assessments in question as a taxation of franchises, under § 174 or 181 of the constitution. There seems to be no provision of law for taxing franchises under either of those sections. Marion National Bank v. Burton, 121 Kentucky, 876, 885.

To recapitulate: Real estate and personal property of individuals and of non-franchise corporations are assessed by the county assessors, both for state and county purposes; tangible railroad property by the Railroad Commission; bank shares, distilled spirits, and corporate franchises by the Board of Valuation and Assessment. It is important to be observed that the latter board has no authority or control over the actions of the county assessors, the county boards of supervisors, or the State Board of Equalization; and, on the other hand, these officials have no authority or control over the actions of the Board of Valuation and Assessment. Nor is there any statutory p. 512provision for equalizing assessments, as between the property which is assessed by the county assessors and that which is assessed by the Railroad Commission and the Board of Valuation and Assessment.

The fact should be emphasized that the Kentucky court of last resort, far from holding that discrimination such as is here complained of is in accord with the constitution and laws of the State, has recognized distinctly that it is not; but has felt constrained to hold that, under circumstances similar to those of the present cases, there is no redress in the courts of the State; and that the p. 513constitutional provisions for equality and uniformity are capable of being put into execution only through the selection of proper assessing officers. Louisville Railway Co. v. Commonwealth, 105 Kentucky, 710, 719. This, while admitting the wrong, merely denies judicial relief, and is not binding upon the federal courts.

In Cummings v. National Bank, 101 U. S. 153, the bank brought its bill in equity in a circuit court of the United States to enjoin the collection of a tax assessed against the shares of its stockholders, not because of inconsistency with the act of Congress relating to the taxation of such shares (§ 5219, Rev. Stats.), but upon the ground of a violation of the constitution and laws of the State of Ohio, which required the taxation of all moneys, credits, and investments, and also all real and personal property, to be by a uniform rule and according to its true value in money. The Supreme Court of the State (Exchange Bank of Columbus v. Hines, 3 Ohio St. 1, 15) had held that they required uniformity not only in the rate of taxation but also in the mode of the assessment upon the taxable valuation. But the legislature had adopted a system of valuation under which there were different bodies acting independently of one another in regard to different classes of property in the process of estimating values for taxation, with one board of equalization having charge of the valuation of the real estate of the whole State once in every ten years, another having charge of the valuation of railroad property every year, a third of the valuation of shares of incorporated banks every year,, but with no common superior to secure equalization as between the different classes of property. The evidence showed that in the county where complainant’s bank was situate the assessors of real property, the assessors of personal property, and the county auditor (who was the assessing officer for bank shares) concurred in establishing a rule of valuation by which real and personal property, except money, were p. 514assessed at one-third of actual values, and money or invested capital at six-tenths of its value; that this rule was followed; and that for the year in question the state board of equalization increased the assessment upon the bank shares to their full cash value. This court held (p. 157) that “when a rule or system of valuation is adopted by those whose duty it is to make the assessment, which is designed to operate unequally and to violate a fundamental principle of the (state) constitution, and when this rule is applied not solely to one individual, but to a large class of individuals or corporations, [that] equity may properly interfere to restrain the operation of this unconstitutional exercise of power”; and that this being the case made by the bill, and being supported by the evidence, while the statute could not be declared unconstitutional, the discriminatory rule must be held void and the injustice produced under it remedied so far as the judicial power could give remedy.

Appellants’ contention that there is no remedy by injunction against the assessments imposed by the Board of Valuation and Assessment places undue emphasis upon the requirement contained in § 172 of the constitution, that all property shall be assessed for taxation at its fair p. 515cash value, estimated at the price it would bring at a fair voluntary sale,—a provision that is repeated in § 4020, Ky. Stats., which deals with the duties of assessing officers. The averments of the bills of complaint, admitted on this record, are that the Board did not assess the property of plaintiffs at fair cash value, but at 75 per cent, thereof, and that this resulted in unequal taxation only because the county assessments were at a still lower percentage. But, laying this aside, and assuming for the moment that the Board performed its duty strictly in accordance with § 172, by assessing plaintiffs’ properties at fair cash value, what is the effect of that action, in view of the systematic undervaluations by the assessing officers charged with valuing other classes of property? This question cannot be answered without considering the relation of § 172 to §§ 171 and 174, which require uniform taxation according to value, and an identical rate as between corporate and individual property. The operation and effect of such a taxing system, both in respect to raising the necessary moneys and in distributing the burden among the taxpayers, depend upon two considerations: first, the rate of taxation, and, secondly, the basis of valuation of the property to be taxed. Plainly, the provision of § 174 that “all corporate property shall pay the same rate of taxation paid by individual property” means that not only the percentage of the rate, but the basis of the valuation shall be the same. “Taxing by a uniform rule requires uniformity not only in the rate of taxation, but also uniformity in the mode of the assessment upon the taxable valuation. Uniformity in taxing implies equality in the burden of taxation, and this equality of burden cannot exist without uniformity in the mode of the assessment, as well as in the rate of taxation.” Exchange Bank of Columbus v. Hines, 3 Ohio St. 1,15, quoted in Cummings v. National Bank, 101 U. S. 153, 158.

It is equally plain that it makes no difference what basis p. 516of valuation—that is, what percentage of full value—may be adopted, provided it be applied to all alike. The adoption of full value has no different effect in distributing the burden than would be gained by adopting 75 per cent., or 50 per cent., or even 10 per cent., as the basis—so long as either was applied uniformly.1 The only difference would be that, supposing the requirements of the treasury remained constant, the rate of taxation would have to be increased as the percentage of valuation was reduced. (Under § 171 of the constitution, the rate of taxation may be varied by the General Assembly from year to year, according to requirements.) Therefore, the principal if not the sole reason for adopting “fair cash value” as the standard for valuations, is as a convenient means to an end—the end being equal taxation. But if the standard be systematically departed from with respect to certain classes of property, while applied as to other property, it does not serve but frustrates the very object it was designed to accomplish. It follows that the duty to assess at full value cannot be supreme in all cases, but must yield where necessary to avoid defeating its own purpose.

A substantially identical question was presented to the Circuit Court of Appeals for the Sixth Circuit in Taylor v. Louisville & Nashville R. R. Co., 88 Fed. Rep. 350, where the Constitution of Tennessee declared that all property should be taxed according to its value, to be ascertained as the legislature should direct, “so that taxes shall be equal and uniform throughout the State,” and the statutes required that the real value of the property be adopted, and where, as here, railroad property and p. 517some other kinds were valued by one set of officials, and property in general by another, without provision for equalization as between the two classes. The court, by Circuit Judge Taft, said (p. 364): “The sole and manifest purpose of the constitution was to secure uniformity and equality of burden upon all the property in the State. As a means of doing so (conceding that defendant’s construction is the correct one), it provided that the assessment should be according to its true value. It emphasized the object of the section by expressly providing that no species of property should be taxed higher than any other species. We have before us a case in which the complaining taxpayer, and other taxpayers owning the same species of property, are taxed at a higher rate than the owners of other species of property. This does not come about by legislative discrimination, but by the intentional and systematic disregard of the law by those charged with the duty of assessing all other species of property than that owned by complainant and its fellows of the same class. . . . [p. 365] The question presented is, then, whether, when the sole object of an article of the constitution is being flagrantly defeated, to the gross pecuniary injury of a class of litigants, and one of them appeals to a court of equity for relief, it must be withheld because the only mode of granting it will involve an apparent departure from the method marked out by the constitution and the law for attaining its sole object. We say ‘apparent’ departure from the constitutional method, because that instrument contemplated a system in which all property should be assessed at its real value. . . . The court is placed in a dilemma, from which it can only escape by taking that path which, while it involves a nominal departure from the letter of the law, does injury to no one, and secures that uniformity of tax burden which was the sole end of the constitution. To hold otherwise is to make the restrictions of the p. 518constitution instruments for defeating the very purpose they were intended to subserve. It is to stick in the bark, and to be blind to the substance of things. It is to sacrifice justice to its incident.”

The justice of this view ha.s been recognized by the state courts of last resort in many cases. Bureau County v. Chicago &c., R. R. Co., 44 Illinois, 229, 239; Cocheco Co. v. Strafford, 51 N. H. 455, 482; Manchester Mills v. Manchester, 58 N. H. 38; Randell v. City of Bridgeport, 63 Connecticut, 321, 324; C., B. & Q. R. R. Co. v. Comm’rs of Atchison Co., 54 Kansas, 781, 792; Ex parte Fort Smith &c. Bridge Co., 62 Arkansas, 461, 468; Burnham v. Barber, 70 Iowa, 87, 90; Barz v. Board of Equalization, 133 Iowa, 563, 565; Iowa Cent. Ry. Co. v. Board of Review (Iowa, p. 5191916), 157 N. W. Rep. 731; Lehigh & Wilkes-Barre Coal Co. v. Luzerne Co., 225 Pa. St. 267, 271; People v. I. C. R. R. Co., 273 Illinois, 220, 244-250. There are declarations to the contrary (Central R. R. Co. v. State Board of Assessors, 48 N. J. L. 1, 7; Lowell v. County Commissioners, 152 Massachusetts, 372, 375), but they take little or no account of the rights of aggrieved taxpayers.

Section 4081, Ky. Stats., as amended by the Act of June 9, 1893, in providing that the ratio of intrastate to total mileage of any interstate railroad “shall be considered” by the Board of Valuation and Assessment in fixing the value of its corporate franchise (intangible property) liable to taxation in the State, does not require the Board to apportion the value of the railroad’s property upon a strict mileage p. 524basis, but merely to consider relative mileage, among other pertinent factors, in the process of valuing that proportion of the property which is situate within the State.

These cases are an appeal and a cross-appeal from a final decree of the District Court in a suit that was commenced by the Louisville & Nashville Railroad Company, a Kentucky corporation, against Henry M. Bosworth and others, then constituting the Board of Valuation and Assessment of that State (Bosworth being also Auditor of Public Accounts), and against the Attorney General of the State and his assistants, seeking to restrain the taking of any steps toward enforcing state and local taxes upon the basis of an assessment of the “franchise” of the company for the year 1913 made by the Board of Valuation and Assessment at the sum of $45,658,630, or upon the basis of any greater valuation than $22,899,200; and this upon the ground that the assessment was unlawful and not in accordance with the statute, was the result of an abuse of power by the Board of Valuation and Assessment, and if enforced would result in a taking p. 526of plaintiff’s property without due process of law and a denial of the equal protection of the laws, contrary to § 1 of the Fourteenth Amendment. By a supplemental bill, Robert L. Greene and others were brought in as successors in office of the original defendants. There being no diversity of citizenship, the jurisdiction was rested upon the ground that the suits arose under the cited provisions of the Federal Constitution; but. plaintiff relied also upon the provisions of the constitution and laws of the State. A chief ground of complaint, based upon the equal protection provision of the Fourteenth Amendment, and also upon the requirement of equal taxation prescribed by §§ 171, 172, and 174 of the state constitution,1 was that the plaintiff had been subjected to illegal discrimination, in that its property had been assessed at more than its actual value, whereas the property of all other taxpayers in the State was assessed uniformly and intentionally at much less than actual value, in fact at not exceeding 60 per cent, thereof. It was alleged, besides, that the method of assessment followed by the Board of Valuation was inconsistent with the provisions of the statutes of Kentucky, and for that further reason the assessment was illegal.

Following this precedent, the court, upon the filing of p. 527the bill in the present case, allowed a preliminary injunction upon the payment of taxes based upon the same valuation. The cause proceeded to final hearing, and the court, having found plaintiff to have been subjected to discrimination by the valuing of other property at approximately 60 per cent, of actual values, but having overruled the other grounds of relief asserted, applied an equalizing factor to the valuation of plaintiff’s franchise, with the result of finding $25,808,493.60 to be the amount at which it was legally taxable, or $2,909,293.60 in excess of the amount upon which payment was made at the inception of the suit. Therefore a final decree was made enjoining defendants from enforcing the assessment complained of, on condition that plaintiff should pay taxes, state and local, on the excess amount named. 230 Fed. Rep. 191, 232.

It may be premised that plaintiff owns and operates a great system of railroads extending throughout Kentucky and twelve other States, embracing (in the year in question) roads operated on its own account to the extent of p. 5284,478.61 miles, of which 1,574.47 miles, or 35.15 per cent., were in Kentucky, and an aggregate of roads owned, operated, and controlled, extending to 7,907.83 miles, of which 1,952.45 miles, or 24.69 per cent., were in Kentucky. It is subject to taxation in Kentucky upon its tangible property as assessed by the State Railroad Commission, and, in addition, to taxation state and local upon its intangible property or ufranchise” under § 4077, Ky. Stats., and succeeding sections (set forth below in the margin), the valuation to be fixed by the Board of Valuation and Assessment.

(3) It is urged that, although it be true that the local assessors in each county assessed other property at less than its cash value, plaintiff is not entitled to relief for this reason if its property was not assessed at more than its fair cash value, even though it was assessed at a higher percentage than other property. To this the same answer may be made. The facts found in this case bring it within the ruling that, in the case last mentioned, was made upon p. 529admitted facts, because of the provisions of the constitution and laws of the State. In this case, as in that, we find it unnecessary to pass upon the merits of the question whether a like result would be reached by the application of the “equal protection” clause of the Fourteenth Amendment.

(4) It is contended that although there be jurisdiction to enjoin the apportioning of the assessment among the counties, cities, and towns for the purpose of local taxation, it was erroneous to enjoin state taxation based upon the same assessment. So far as this is bottomed upon the theory that the suit is a suit against the State, it is disposed of by the decision cited. It is argued, however, that while this court has held that in a proper case a bill may be brought to restrain apportionment and certification to the counties of a tax imposed by a state board in violation of federal rights (Fargo v. Hart, 193 U. S. 490), yet Coulter v. Weir, 127 Fed. Rep. 897, 906, 912—a case that arose out of the same provisions of the Kentucky statutes that are here involved—is an authority in opposition to granting relief against the state taxes, and that it was approved by this court in Coulter v. Louisville & Nashville R. R. Co., 196 U. S. 599, 608. What was said upon the subject in the case last mentioned was not a part of the matter decided, as a reference to the opinion clearly shows; for the decision in favor of defendants proceeded upon the ground that the evidence was insufficient to sustain the bill. Coulter v. Weir, supra, is easily distinguishable. There, the Auditor of Public Accounts was the sole defendant. The Circuit Court of Appeals, after citing Poindexter v. Greenhow, 114 U. S. 270, 286-288; Reagan v. Farmers’ Loan & Trust Co., 154 U. S. 362, 390; Scott v. Donald, 165 U. S. 107, 112; Smyth v. Ames, 169 U. S. 466, 518; Fitts V. McGhee, 172 U. S. 516, 529; and Taylor v. Louisville & Nashville R. R. Co., 88 Fed. Rep. 350, and quoting from the opinion in the Taylor Case to the effect p. 530that a suit against individuals seeking to enjoin them from doing certain acts which they assert to be by authority of the State, but which complainants aver to be without lawful authority, is not a suit against the State, and from Fitts v. McGhee to the effect that a suit against state officers not holding any special relation to the particular statute alleged to be unconstitutional nor charged with its enforcement, is a suit merely to test the constitutionality of a state statute and therefore is a suit against the State, proceeded (p. 906) to sustain the action only so far as it sought to enjoin the defendant from certifying to the county clerks the assessment complained of. The contrary result reached with respect to the tax due to the State went solely upon the ground that as to this tax the Auditor had no act to perform under the statute and no authority to enforce collection; the court proceeding to say further (p. 907): “If the defendant had been about to take some step under color of the law tending to complete the assessment, or if he had been authorized to seize property and was about to do so, then he was, assuming the case to be with the complainants on the merits, about to commit a trespass for which he would be individually liable, and in a proper case equity might enjoin his proposed action upon the ground of his want of legal authority. But this is not the case made in respect to the tax due the state, and the bill, so far as it sought relief against the state tax, must be dismissed without regard to the merits.” It would seem that the court overlooked §§ 144, 145, and 152, Ky. Stats., which require the Auditor to keep account of taxes collected, keep a correct list of balances due by individuals to the Commonwealth, audit and enter in account all demands payable at the treasury, report to the Attorney General all public debtors who fail to render their accounts at the proper time or to pay the money in their hands due the Commonwealth into the treasury, and grant written authority to the Treasurer to receive money p. 531from public officers or other persons due to the Commonwealth. However, we need not rest upon this point, since in the present case the Attorney General and his assistants are joined as parties, and the final decree under review restrains all of the defendants from taking any steps to collect the excessive taxes due to the State or to any of its subdivisions, and from instituting or prosecuting any proceedings against the plaintiff, either by indictment or civil action, because of any alleged delinquency or failure of the plaintiff to pay taxes upon its franchise on a valuation above the amount found by the court to be proper. The decree, with respect to the state as well as the local taxes, is clearly within the authority of Ex parte Young, 209 U. S. 123, 156, where Fitts v. McGhee, 172 U. S. 516, 530, was distinguished upon the ground that in that case no state officer who was made a party had to do with the enforcement of the statute alleged to be unconstitutional.

(5) It is contended by defendants that the evidence was insufficient to warrant the conclusion of the learned District Judge that in fact property in general in the State of Kentucky was systematically undervalued. A similar question of fact was involved in Coulter v. Louisville & Nashville R. R. Co., and this court (p. 609) held the evidence to be insufficient. In the present case, besides much to the same effect as that presented in the Coulter Case, a mass of additional evidence was introduced, including extracts from the United States Census Report for the year 1910; reports of the State Board of p. 532Equalization for the years 1910,1911,1912, and 1913; report of the State Tax Commission of 1913; testimony of a member of the State Board of Equalization who served in the years 1908 to 1911, inclusive; affidavits of nearly 200 individuals from 47 counties in different parts of the State; and much besides. The evidence is too voluminous to be adequately reviewed within reasonable limits of space, and we content ourselves with saying that it comprises a body of official admissions and direct and circumstantial evidence from private and public sources that are unimpeached, fully sustaining the finding of the trial court that the great mass of property in the State, so far as assessed by the county assessors under the review of the county boards of supervisors and the State Board of Equalization—and this embraces all tangible property except railroad property and distilled spirits—during a period of years prior to and including the year 1913, was intentionally, systematically, and notoriously assessed far below its actual value, and at certainly not exceeding 60 per cent, of its fair cash value. There is little to the contrary except the general presumptions arising from the statutory duty of assessors to assess at fair cash value and from the oath customarily required of individual taxpayers, and a large number of stereotyped affidavits made by former assessors to the effect that they endeavored to follow the law and assess all property at its fair cash value, and if any property was otherwise assessed it was unintentional and not pursuant to any agreement between the assessor and the taxpayer. In our judgment this does not materially detract from the convincing effect of plaintiff’s proofs. The evidence is analyzed briefly in the opinion of the District Judge, 230 Fed. Rep. 227-231, and nothing more need be added to his comments upon it.

This disposes of all the points raised by defendants. (6) It is contended by plaintiff that the Board of Valuation and Assessment, in assessing plaintiff’s franchise, p. 533proceeded upon erroneous principles and adopted an improper method, not only in failing to equalize the assessment so as to make it conform to the basis generally adopted by other assessing officers in assessing other kinds of property, but also in failing to follow the course prescribed by the Kentucky statute; and that with respect to its complaint in this regard the decree of the District Court gave inadequate relief.

The statutory provisions are in §§ 4077-4081, Ky. Stats., the material portions of which are set forth in the margin.1 p. 534They originated in the first General Assembly after the new Constitution, being §§ 1 to 5 of Article III of Chap. 103 (November 11, 1892; Acts 1891-1893, p. 299), which were amended by Chap. 217 of the same session (June 9, 1893, p. 990), by Act of March 29,1902 (c. 128, Acts 1902, pp. 281, 305-309), and by Act of March 15, 1906 (c. 22, Laws 1906, pp. 88, 126-130). One of the amendments, having to do with one of the questions we are to consider, will be mentioned below.

poration, company or association; the kind of business engaged in; the amount of capital stock, preferred and common; the number of shares of each; the amount of stock paid up; the par and real value thereof; the highest price at which such stock was sold at a bona fide sale within twelve months next before the thirtieth day of June of the year in which the statement is required to be made; the amount of surplus funds and undivided profits and the value of all other assets; the total amount of indebtedness as principal, the amount of gross or net earnings or income, including interest on investments, and incomes from all other sources for twelve months next preceding the thirtieth day of June of the year in which the statement is required; the amount and kind of tangible property in this State, and where situated, assessed, or liable to assessment in this State, and the fair cash value thereof, p. 535evidence as it may have, is to “ fix the value of the capital stock of the corporation . . . and from the amount thus fixed shall deduct the assessed value of all tangible property assessed in this State, or in the counties where situated. The remainder thus found shall be the value of its corporate franchise subject to taxation as aforesaid.” It has been held by the Kentucky Court of Appeals, and by this court, that the “capital stock of the corporation” includes its entire property of every kind and description, tangible and intangible, and that what is called its “ corporate franchise” is the intangible property of the company in Kentucky. Henderson Bridge Co. v. Commonwealth, 99 Kentucky, 623, 639, 641; Henderson Bridge Co. v. Kentucky, 166 U. S. 150, 154; Adams Express Co.

other States as well as in this State, the statement shall show the following facts in addition to the facts hereinbefore required: The gross and net income or earnings received in this State and out of this State, on business done in this State, and the entire gross receipts of the corporation, company or association in this State and elsewhere during the twelve months next before the thirtieth day of June of the year in which the assessment is required to be made. . . . Provided, That said board, from said statement, and from such other evidence as it may have, if such corporation, company or association be organized under the laws of this State, shall fix the value of the capital stock of the corporation, company or association, as provided in the next succeeding section, and from the amount thus fixed shall deduct the assessed value of all tangible property assessed in this State, or in the p. 536v. Kentucky, 166 U. S. 171, 180; Louisville Tobacco Warehouse Co. v. Commonwealth, 106 Kentucky, 165, 167; Marion National Bank v. Burton, 121 Kentucky, 876, 888.

§ 4081. (5) Interstate carrier—franchise—how fixed. If the corporation organized under the laws of this State, or of some other State government, be a railroad . . . company or a corporation performing any other public service, the lines of which extend beyond the p. 537erroneous principle. Henderson Bridge Co. v. Commonwealth, 99 Kentucky, 623, 645; Hager v. American Surety Co., 121 Kentucky, 791, 800. It appears that the Board, having received a report from the plaintiff, and having made a tentative assessment of its franchise for taxation for the year 1913, had a hearing upon the matter in the presence of counsel for plaintiff, and as a result made up its assessment in a manner summarized by the District Court (230 Fed. Rep. 193) as follows:

“The details of the assessment, showing the manner in which the board arrived at $45,658,630 as the value of the franchise, are these: The board first found the fair cash value of plaintiff’s capital stock, hereafter termed its unit, to be $262,252,566. This valuation it arrived at by capitalizing at 6 per cent, what it took to be plaintiff’s net income from operations on its own account for the year ending June 30, 1912, as of which date the assessment speaks, less what it took to be its net income from certain property which it took to be nontaxable. Plaintiff’s reports to the Kentucky Railroad Commission and to the Interstate Commerce Commission as of that date state plaintiff’s net income for that year to have been $18,052,905.12. This included the net income from the operation by plaintiff of three railroads, two in and one out of Kentucky, on account of the owners, which amounted to $1,439,604. The board deducted this sum from the total, leaving a balance of $16,613,301.12 of net income from operations on its own account. It then deducted from this balance the sum of $878,147 on account of its net income from such nontaxable property. This left a balance of $15,735,154, which capitalized at 6 per cent, gave the sum of $262,252,566, at which it valued the unit. The nontaxable property, the income from which was thus deducted, consisted of stocks in other corporations which owned property in this state and which had paid the taxes thereon. The deduction was based on p. 538sections 4085 and 4086, Kentucky Statutes, and the construction thereof by the Court of Appeals in the cases of Com. v. Walsh’s Trustee, 133 Kentucky, 103,117 S. W. Rep. 398, and Com. v. Fidelity Trust Co., 147 Kentucky, 77, 143 S. W. Rep. 1037. It then apportioned $92,181,766 of this sum to Kentucky. The sum so apportioned was 35.15 per cent, thereof. The percentage which it took was the percentage which the mileage operated by plaintiff in Kentucky on its own account was of the entire mileage so operated by it. The entire mileage so operated by it was 4,478.61, of which 1,574.41 was in Kentucky. It then added to the sum so apportioned $2,468,612, the excess in the value which it took that the portion of the unit in Kentucky was over such mileage proportion of the value thereof. It found this excess in value to be in the intangible part of the portion of the unit in Kentucky, and that in this way: The value of the tangible part it took to be $177,038,113, and that of the intangible $85,214,453. The proportion of the gross income derived from Kentucky of the entire gross income it took to be 38 per cent., or 2.85 per cent, in excess of such mileage proportion. It took it that this showed that the value of the portion of the intangible part of the unit in Kentucky was 2.85 per cent, of the value of such part, or the sum of $2,468,612, in excess of such mileage proportion thereof. Adding this sum to such mileage proportion of the value of the unit, to wit, $92,181,766, made the value of the portion of the unit in Kentucky $94,650,388. It then reduced this sum to that of $94,500,000 as the value. This reduction is not to be accounted for, except on the ground that it wanted to place the value of such portion in round numbers. This lessened the addition to such mileage proportion of the value of the unit on account of the excess in value of the portion of the intangible part of the unit in Kentucky over such mileage proportion thereof from the sum of $2,468,612 to $2,318,244, which latter sum was the p. 539difference between $94,500,000 and $92,181,766. But the board had no sooner made this reduction than it made a further reduction from this sum in round numbers to another sum, not in round numbers, to wit $75,139,402, as the value of the portion of the unit in Kentucky, and there it stayed. On the assumption that this sum was reached by reducing from $94,500,000, there is no accounting for how it reached it, rather than any other sum. The only account of it which it gave was that it so did ‘to be conservative, and out of an abundance of caution, to the end that no injustice may be done respondent in arriving at the value of the corporate franchise of respondent in this state.’ And it noted the fact that this sum was ‘less than 80 per cent, of that which it believes to be the fair cash value of Kentucky’s proportion of the entire capital stock of respondent.’ It then deducted from this last sum the assessed value of the tangible property in Kentucky, to wit, $29,500,772, which left the sum of $45,658,630 as the value of the franchise. Such is what the board did on the face of things.”

(7) The application of this method by the Board is attacked in two respects, first, in the manner of deducting non-taxable assets, and, second, in the rate of percentage used in capitalizing the income. As to the first point, the insistence is that as the tax under consideration is merely an intangible-property tax, it results that if p. 541among the assets of the corporation going to make up its total capital value there were some that were non-taxable, it was necessary to deduct these before arriving at the taxable capital. It is pointed out that under § 4085, Ky. Stats., the property of all corporations is to be assessed in the name of the corporation, and “so long as said corporation pays the tax on all its property of every kind, the individual stockholders shall not be required to list their shares in said corporation;” the argument being that, to the extent that plaintiff held the stock of other corporations having property in Kentucky and paying taxes thereon in that State, this stock in plaintiff’s hands was non-taxable, and its value should have been deducted from the total value of its capital stock previously ascertained; citing Commonwealth v. Fidelity Trust Co., 147 Kentucky, 77, 84. As the record shows, the Board of Valuation and Assessment recognized plaintiff’s right to deduction upon this account, and for this reason, in applying the capitalization-of-income method, deducted from $16,613,301.12, net income from operated roads, the sum of $878,147, the net income from non-taxable securities as reported by plaintiff to the Auditor and the Railroad Commission, taking the balance only, or $15,735,154, as the income to be capitalized in order to arrive at the value of the entire system. The criticism is that adopting this method had the effect of deducting only such stock in other corporations as paid dividends, whereas plaintiff insists that much of its stock thus held, although paying no dividends, or dividends at a low rate, had large intrinsic value by reason of the control it gave over other lines of railroad and the increment it brought to the aggregate income of the company. There was evidence that these non-taxable securities amounted to upwards of $30,000,000 in value, whereas the capitalization at 6 per cent, of their income of $878,147 produced a value of only $14,469,113. In our opinion, it is a sufficient answer to this contention p. 542to say that the Board merely carried out the capitalization-of-income plan of valuation, perhaps to its logical extreme, but certainly not in a manner that enables this court to say that they pursued a fundamentally wrong method.

What the statute requires, in this respect, is a question of state law, upon which we must follow the Kentucky Court of Appeals if that court has passed upon it. It is true that the only authority of the Board was to assess intangible property, and, whether it followed the local statute or not, it could not, consistently with the due process provision of the Fourteenth Amendment, include, at least as against any foreign corporation, any part of its p. 543tangible property lying without the State; and it is not to be supposed that the statute intended to prescribe a different rule with respect to Kentucky corporations, since domestic and foreign corporations are dealt with in the same section (§ 4081). That section, according to its terms, first provides that the Board shall “fix the value of the capital stock as hereinbefore provided,” there being, as already shown, no provision respecting the method except that the ascertainment shall be based upon the statement of the corporation and such other evidence as the Board may have. The section proceeds to declare that “that proportion of the value of the capital stock which the length of the lines operated, owned, leased, or controlled in this State bears to the total length of the lines owned, leased, or controlled in this State and elsewhere, shall be considered in fixing the value of the corporate franchise of such corporation liable for taxation in this State.” Referring now to the mode of procedure, these words evidently contemplate an apportionment, as an aid in reaching the ultimate result (valuation of franchise taxable in Kentucky); but it is an apportionment of “the value of the capital stock,” which includes both tangibles and intangibles, within and without the State. This is not to say that any property without the State may be taxed. It requires state mileage valuation to be considered and compared with system mileage valuation, but it does not make this comparison conclusive. As the section was enacted originally, the words “considered in fixing” were not contained in it, so that upon the face of things the mileage pro-rate was conclusive in ascertaining the State’s proportion of the value of the corporate franchise,—just as county and district mileage was and still is conclusive as to apportionment between those taxing districts. But by the Act of June 9, 1893, the words “considered in fixing” were inserted, the necessary effect of which was to make the relation of state p. 544mileage to system mileage a factor that must be considered, but not necessarily given conclusive weight. Section 4081 says nothing about deducting the value of tangible property, and the preceding sections speak of deducting only such tangible property as is located within the State. Indeed, there is no provision requiring the corporation to report its tangibles outside of the State. And, if all tangibles were deducted before apportionment, then the deduction of “all tangible property assessed in this State,” specifically required by the proviso to § 4079, obviously would result in a double deduction. The sections are inartificially drawn in this as in some other respects. The District Court, upon elaborate consideration in the case of the 1912 assessment (209 Fed. Rep. 418-429), reached the conclusion that by the proper construction the entire value of capital stock should be first apportioned, having regard to the mileage, and that from Kentucky’s portion of the whole the assessed value of the tangibles within the State should then be deducted; and that the Kentucky Court of Appeals had so decided in Commonwealth v. Covington & Cincinnati Bridge Co., 114 Kentucky, 343.

Plaintiff relies upon two cases, the first being Adams Express Co. v. Kentucky, 166 U. S. 171, 180, where this court, by Mr. Chief Justice Fuller, after referring to the statutory provisions now under consideration, and the use in the several sections of the words “franchise” and “corporate franchise,” said: “But taking the whole act together, and in view of the provisions of sections 4078, 4079, 4080 and 4081, we agree with the Circuit Court that it is evident that the word ‘franchise’ was not employed in a technical sense, and that the legislative intention is plain that the entire property, tangible and intangible, . . . should be valued as an entirety, the value of the tangible property be deducted, and the value of the intangible property thus ascertained be taxed under these provisions; and as to railroad . . . companies, whose lines p. 545extend beyond the limits of the State, that their intangible property should be assessed on the basis of the mileage of their lines within and without the State. But from the valuation on the mileage basis the value of all tangible property is deducted before the taxation is applied.” The matter of apportionment was not there involved, nor what method or order was prescribed by the statute; the question at the moment being whether the tax was a true franchise tax, or merely a property tax upon intangible property. The significant thing was that the value of tangibles was to be deducted; whether before or after apportionment was a matter of no present significance. And the last sentence quoted, in the expression “valuation on the mileage basis,” indicates an apportionment of the entire capital stock, mile for mile, prior to the deduction of tangibles.

The second case referred to is Coulter v. Weir, 127 Fed. Rep. 897, 907-908, where the Circuit'Court of Appeals for the Sixth Circuit, in dealing with the question whether the law was repugnant to the commerce clause or the Fourteenth Amendment, used this language: “ Neither is the injunction in reference to a deduction of the value of tangible taxable property from the gross value of the whole corporate property limited to such as is situated within the state of Kentucky. If tangible property having a situs outside the state be included in the valuation of the company’s intangible property, the purpose of the law, being to tax only intangible property, is defeated. We therefore read the act, as the Supreme Court seems to have read it in Adams Express Co. v. Kentucky, as requiring the deduction of tangible property from the gross value of all corporate assets, whether such tangible property be within or without the state.” The question of apportionment, or of the particular method to be pursued in making the assessment, was not involved in this case, any more than in Adams Express Co. v. Kentucky, supra. p. 546It is true, as the court said, that if tangible property having a situs outside the State were included in the valuation, the purpose of the law to tax only intangible property would be defeated. The same result would follow if tangible property within the State were included in the valuation. But it does not follow that tangibles, within or without the State, are to be included in the valuation because included in the apportionment. Any excess of tangibles, without or within the State, properly may be given its due weight as a factor modifying the tentative result reached by mere mileage apportionment. In the absence of special circumstances, this is not of itself necessarily an unjust method of apportioning such a tax. Western Union Telegraph Co. v. Massachusetts, 125 U. S. 530, 552-553; Western Union Telegraph Co. v. Taggart, 163 U. S. 1, 18, 20, 22, 26.

However, the decision of the Kentucky Court of Appeals in the Covington & Cincinnati Bridge Co. Case, supra, is directly in point, and, being so, is conclusive upon the question of the proper statutory method. There the company’s “capital stock,” valued by the stock-and-bond method, amounted to $1,330,000. It owned an interstate bridge, 59 per cent, of the length thereof being in Kentucky, the remainder in Ohio; and it had tangible property in Kentucky assessed at $452,000. The State of Ohio assessed the portion of the bridge lying in that State at $237,984, and the company paid the taxes thereon. The Kentucky Board of Valuation and Assessment fixed the value of its entire property or capital stock at $730,349, and, deducting from this the assessment of tangibles in Kentucky ($452,000), took the difference, or $278,349, as the franchise valuation. The company, insisting that the correct valuation was $180,489, paid to Kentucky the tax on this amount, reserving the question of its liability for a claimed balance of $464.84, and of the method or basis upon which its franchise should be valued for p. 547taxation by the Board, to be determined by the courts. The matter was submitted to the Circuit Court as an agreed case presenting two questions, (1) whether the company owed to the Commonwealth the sum of $464.84, or any part thereof, on account of the tax of its franchise, and (2) what method or basis should be adopted by the State Board of Valuation and Assessment for fixing the value of defendant’s franchise for taxation in the Commonwealth of Kentucky. That court held that the Board had adopted an improper method, and that the company, by the payment it had made, had fulfilled its obligation to the State; reaching this conclusion by taking the aggregate market value of its capital stock and bonded indebtedness ($1,330,000), deducting the assessed value of the Ohio tangibles ($237,984), and apportioning the balance of $1,092,016 on the basis of 59 per cent, to Kentucky and 41 per cent, to Ohio. From 59 per cent, of $1,092,016, namely $664,289, it deducted the tangible property assessed in Kentucky, $452,000, which left a balance of $192,289 as the value of the Kentucky franchise. The State appealed to the Court of Appeals, where it insisted that by the method adopted by the Circuit Court the company was not taxed upon its entire property. The report of the case states (pp. 348, 349): “It is insisted for the State that the proper way to arrive at the valuation of the franchise is to take the total value, $1,330,000, and get 59 per cent, of it, which is $782,700, and that this presents the total of the tangible property and of the franchise in Kentucky. Therefore, if we deduct from this total $782,700, the assessment of the tangible property in Kentucky, $452,000, the balance, $330,700, is the value of the franchise. The board fixed the value of the franchise at $278,349, or considerably less than the result thus obtained.” It was insisted for the Bridge Company that the Circuit Court had followed Henderson Bridge Co. v. Commonwealth, 99 Kentucky, 623, but the Court of Ap-

This, we repeat, does not necessarily result in including in the Kentucky franchise valuation tangible or intangible property not located within that State. It does permit the Kentucky officials to take into consideration extra-state tangibles, as well as intangibles, constituting portions of the unit of which they are valuing a part. This is permissible, even in applying the statute to non-resident corporations. It is settled that total stock or total assets, situate partly within and partly without the State but organically related, may be taken into consideration as a means of reaching the true cash value of property within the State, and that the mileage relation may be given its proper weight. State Railroad Tax Cases, 92 U. S. 575, p. 549608; Pullman’s Palace Car Co. v. Pennsylvania, 141 U. S. 18, 26; Pittsburgh &c. Railway Co. v. Backus, 154 U. S. 421, 430-431; Western Union Telegraph Co. v. Taggart, 163 U. S. 1, 26, 27; Fargo v. Hart, 193 U. S. 490, 499.

(12) The District Court, having found that the value of plaintiff’s entire capital stock must be taken to be at least as much as $262,252,566, the amount found by the Board, and that the apportionment must be upon the basis not of the operated mileage only, but of all mileage operated, owned, leased, and controlled within and without the State, was led to the further conclusion, as a corollary (230 Fed. Rep. 202-204), that the valuation of the total capital stock should include an item that the Board had overlooked, viz., the value of so much of the controlled mileage as was not represented by plaintiff’s holdings. (Of course, in adopting the capitalization-of-income method of valuation, no account was taken of the interests of others than plaintiff in the controlled roads.) Plaintiff contends that the statute does not justify this procedure; that it is beyond the power of the State because it results in taxing property not belonging to the plaintiff; and that a more logical and consistent method would be to arrive at the operated, owned, leased, or controlled mileage by treating as controlled mileage not the p. 551total, but only a proportion corresponding to the amount of stock held by plaintiff in the controlled roads. The matter is not free from doubt; but we concur in the view of the District Judge that it was the legislative intent that, in fixing the percentage apportionable to Kentucky and to be taken into consideration in valuing the taxable franchise, the whole of the controlled mileage within and without the State was to be treated as a part of the aggregate “capital stock,” not only in fixing the mileage, but also in fixing the valuation, upon which the apportionment is to be based. It is not to be supposed that the legislature intended to require that, in making the mileage apportionment, which as already shown is not conclusive but evidential upon the valuation of the taxable franchise, fractional interests in the controlled roads should be taken into the account, but rather that a controlled road should be treated the same as a road owned.

After the court delivered its opinion to this effect, and before the entering of the final decree, plaintiff tendered what is called a supplemental bill, which the court allowed to be filed, purporting to show all the facts respecting the p. 552controlled roads, and to demonstrate that the result of adopting the process indicated by the court’s opinion would be to reduce the assessment below the amount upon which the company already had paid taxes, and this whether the valuation were made on the stock-and-bond plan or on the capitalization-of-income plan. It appears that defendants never filed any answer to this, and it is urged that because of their failure to do so its allegations must be taken as confessed. But there is nothing to show that defendants were ordered to answer; and inasmuch as this supplemental bill was filed after the hearing and decision of the cause, and the record contains nothing to show why its averments were ignored, we are not able to say either that defendants were in the position of admitting those averments, or that the court erred in failing to give effect to them. But at least it can be said that plaintiff was not in default for omitting to introduce evidence at the hearing respecting these matters, they not having been considered by the Board, nor set up in the original pleadings, nor so far as appears deemed by any of the parties to be material until the court rendered its decision. Yet, as will appear presently, the court in effect decided the case against plaintiff because there was nothing in the record to show the facts concerning the controlled mileage.

(13) In attempting to carry into effect its conclusions upon the facts and the law, the District Court pursued the following process of reasoning (p. 231): Assuming $262,252,566 to be the true cash value of plaintiff’s entire capital stock, as the Board found it to be, and 24.6901 (in the opinion this is misprinted as “ 24.9601”) to be the true percentage of the fair cash value apportionable to Kentucky, and that Kentucky’s portion was not of greater value than the mileage proportion, the fair cash value of the portion of plaintiff’s capital stock attributable to Kentucky would be $64,750,418.79. Sixty per cent, of p. 553this—the factor of equalization—was taken to be $38,850,251.12. Deducting $29,500,772, the assessed value of the tangible property, would leave $11,349,479.27 as the value of the franchise—this being less than half of the amount upon which payment had been made. (There appear to be some additional misprints, or trifling errors of calculation, but not sufficient to affect the result.) But since the Board had omitted to include in the value of the capital stock that interest in the controlled mileage not represented by the stock and bonds owned by plaintiff, and since there was nothing in the record to show the value of this interest, or the value of that portion of the controlled mileage located in Kentucky, the court assumed that the result of considering these two matters might be to make the value of the Kentucky portion of plaintiff’s capital stock as much as $92,181,766, the sum at which the Board fixed it, instead of $64,750,418.79, the amount computed by the court. The court proceeded to say (p. 232):

(1) As to the sufficiency of proof of general, systematic and notorious undervaluation of property by assessors in Kentucky, (2) in holding that the jurisdiction of the courts extends to enjoining the collection of illegal taxes when assessed for state purposes as well as when assessed for local purposes, and (3) in holding that, as applied to an p. 556interstate railroad, the Kentucky statutes require first an apportionment of a proper share of the railroad’s total “capital stock” (tangible and intangible property) value to Kentucky, followed by a deduction from Kentucky’s portion thereof of the value of the. railroad’s tangible property in that State.

The salient facts of the present cases are as follows: During the two years pertinent to the controversy, plaintiff operated a system of railroads extending throughout the State of Kentucky and ten other States, having, according to the averments contained in the bills of complaint and the proofs upon which the cases were heard, a total mileage owned, operated, leased, or controlled amounting to 4,550.54, of which 563.79 miles, or 12.3 per cent., were in Kentucky. For the year 1912, the Board of Valuation and Assessment fixed plaintiff’s capital stock valuation for the State of Kentucky at $27,124,240, and deducted from this the tangible property assessment made by the Railroad Commission, $12,377,383, leaving the franchise assessment $14,746,857. The District Court granted a restraining order, followed by a preliminary p. 559injunction, conditioned that plaintiff should pay taxes, state and local, on a valuation of $6,618,585 (209 Fed. Rep. 465), and eventually made a final decree enjoining the enforcement of the assessment, conditioned upon plaintiff’s paying taxes upon an additional valuation of $1,347,212, or $7,965,797 in all.

With respect to three of the questions raised by defendants herein: (a) That the suits are not maintainable because in effect suits against the State; (b) that plaintiff has an adequate remedy at law under § 162, Kentucky Statutes; and (c) that plaintiff is not entitled to relief by way of equalization because of the undervaluation of property in general by the local assessors; these cases, like the Louisville & Nashville Cases, are controlled by the decision in Greene v. Louisville & Interurban R. R. Co., ante, 499. Upon the question of the sufficiency of the proofs to warrant the conclusion of the District Court as to the general, systematic, and notorious undervaluation of property in Kentucky by the assessing officers for purposes of taxation, and as to the ratio of such undervaluation, the present cases are indistinguishable from the Louisville & Nashville Cases, ante, 522, and are controlled by our decision therein. Upon the point that the jurisdiction of the court extends to enjoining the collection of illegal taxes, whether assessed for state or for local p. 560purposes, the present cases are controlled by the decision in the Louisville & Nashville Cases.

For the year 1912 the Board of Valuation and Assessment made a preliminary assessment of the franchise at $21,500,000, of which notice was given to plaintiff, and, after a hearing, finally assessed the franchise at $14,746,857; a result reached, as already stated, by taking Kentucky “ capital stock” at $27,124,240, and deducting the tangible property assessment of $12,377,383. In granting the preliminary injunction (209 Fed. Rep. 465), the court, deeming that the Board had found the fair cash value of the portion of plaintiff’s capital stock in the State to be $27,124,240, equalized this with the undervaluation of other property in the State on a basis of 70 per cent, in order to arrive at a proper valuation of the franchise for the purposes of a temporary injunction. Upon the final hearing, the court reached the conclusion that the valuation of $27,124,240 was itself the result of an p. 561equalization by the Board at 80 per cent, of what they had found to be the fair cash value of the capital stock in Kentucky; that is to say, that they had found the fair cash value to be $33,905,300. Having concluded that equalization should be made upon the basis of 60 per cent., the court applied this percentage to the $33,905,300, making the equalized capital stock value $20,343,180, deducting from which the assessed value of the tangibles $12,377,383, left $7,965,797 as the value of the franchise. Plaintiff contends that there was no sufficient evidence to support the conclusion that the Board’s valuation of $27,124,240 was the result of an 80 per cent, equalization; but the contention is clearly unfounded.

The claim for an allowance by reason of the treasury securities and the terminals situate in other States is based upon the principle laid down in Fargo v. Hart, 193 U. S. 490, 499, and similar cases, to which we adhere, that a State cannot tax property outside of its jurisdiction belonging to persons domiciled elsewhere, and that although the fact that property is part of a system and has its actual uses only in connection with other parts of the system may be considered by the State in taxing that portion of the system which is within its borders, yet the notion of p. 563organic unity must not be made the means of unlawfully taxing property without the State.

As to the terminals, the District Court held that since it did not appear but that the Board made due allowance on account of them, it must be presumed that they did make such an allowance. As to the treasury securities, the court held that plaintiff had not made an adequate showing to the Board of Valuation and Assessment; that it did not appear but that the Board had given proper consideration to them; and that plaintiff had not put the court in possession of the evidence upon which to determine whether the securities were a part of its “unit,” or why the securities were held by plaintiff instead of being distributed to the stockholders, and that the case of Coulter v. Weir, 127 Fed. Rep. 897, 909-911, did not apply because there the property in question had been placed in the hands of trustees for the benefit of stockholders. Upon petitions for rehearing, plaintiff insisted that if the treasury securities were to be taken as a part of the unit, then, since these securities represented 'a controlling interest in certain large lines of railroad lying outside of Kentucky (the Central of Georgia, the Yazoo & Mississippi Valley, and the Indianapolis Southern systems), the apportionment should take the mileage of these controlled lines into account, which would have yielded a total mileage of all fines amounting to 7,862.95, and Kentucky mileage 560.49, or only 7.13 per cent, for the year upon which the 1912 assessment was based, and a somewhat smaller percentage for the following year. To this the court responded that the contention came too late, and it cannot be said that this was an unreasonable view, or showed an abuse of discretion. In addition to the averments respecting comparative mileage contained in the original bills, it was distinctly stated in an amended bill in the case pertaining to the 1912 assessment that the treasury securities in question had not “any connection p. 564whatever with the business of transportation carried on by complainant, and that none of said stocks, bonds or other properties covered or represented the physical railroads or other properties operated by complainant.”