Fitchburg Railroad v. Prescott , 47 N.H. 62 ( 1866 )

Bellows, J.

The question here is, whether the law which subjects wood, timber, logs and lumber exceeding fifty dollars in value, to taxation, applies where the articles are owned by a railroad corporation and distributed along its line for present use in operating and repairing such road. By the law of July 4, 1860, ch. 2351, such property is made subject to be taxed in the town where it shall be on the first day of April, to the owner if he reside in that town, otherwise to the person having the care and custody thereof; and by the act of July 1, 1863, ch. 2736, which is amendatory of the former act, it is provided that such wood, bark, timber, logs and lumber, manufactured or otherwise, on its way to market, on the first day of April, or temporarily delayed on its way to market, shall be taxed to the owner in the town where he resides, if he reside in this State.

The purpose of this legislation was apparently to reach this description of property when held by the owner in considerable quantities for sale, leaving untaxed the fuel and lumber provided for immediate use, which, it was supposed, would not exceed fifty dollars in value. If the quantity exceed that sum, in any instance, it would however be liable to be taxed, even though it was designed for immediate use.

The quantity in this case exceeded that amount, and therefore was liable to be taxed, though provided for present use, unless it be regarded as part of the railroad and taxable in that form.

By the Revised Statutes, ch. 39, sec. 4, every railroad corporation is to be taxed one per cent, on the value, on the first day of January, of that part of its capital stock expended within this State, to be determined by the certificate of the justices of the Superior Court.”

By law of July 1, 1843, ch. 34, sec. 4, (C. S. ch. 41, sec. 4,) it is enacted that the tax shall be assessed in proportion as near as may be, to the taxation of other property in the several towns in which said railroads are situate.

Under these laws railroads are assessed by the justices of the Supreme Court upon the value of their capital stock on the first day of April in each year, which was expended in this State; and the question is, whether the wood and lumber distributed along the various railroad lines and designed for immediate use is for this purpose to be deemed a part of the railroad, and so included in the assessments of those corporations.

In determining the value of such capital stock various circumstances are taken into account, such as the amount originally expended, the business done, the dividends made, and the market value as indicated by the sales of shares. In most cases the best evidence to be had of the value of such stock is the market price at the brokers’ board. In some cases it may properly be quite decisive; in other cases there are either no sales at all or in consequence of debts owing by the corporation they are merely nominal. But in all cases in determining the value, the entire railroad including the franchise, the track, land, buildings and fixtures, and also the rolling stock, tools and whatever is necessary to the complete equipment of the road should be taken into the estimate, and among them must be included, we think, the fuel and timber provided for immediate use. If the present value of the capital stock may properly be determined by the market price it bears, or if that may be considered as an important element in fixing such value — and of this we have no doubt — then it is quite clear, we think, that such wood and timber must enter into, and be included in, the value of the stock, and must, therefore, in that form, be taxed as part of the railroad.

Such is the settled practice of the justices of this court in assessing the railroads ; and so we understand it has been for a long time. A stock of wood and sleepers and other lumber is, of course, indispensable for the operation of the road; in many instances even, in this State, this stock is and ought to be large; sometimes reaching in value $60,000 or $70,000; and it could not but affect materially the price of the shares. In some cases the quantity of wood alone, consumed by a single railroad, rises as high as ten or twelve thousand cords, and it is perfectly obvious that if none was provided and on hand, the price of shares would be materially diminished.

From these considerations it is apparent that the wood and lumber provided by railroads for present use, are already taxed as part of the railroads, and if properly so taxed, it must be decisive of the question before us.

Upon the point whether these materials are properly so taxed, the long and settled practice of the court might well be considered as conclusive. Indeed, such materials, as well as the rolling stock, tools and the like, may well be deemed, for the purposes of taxation, a part of the railroad itself. In respect to the locomotives, cars, tools and the like, it is unquestionably so, although in their nature personal property; and still they go to swell the value of the capital stock for the purposes of assessment, and in that form are taxed. In Pierce v. Emery & al., 32 N. H. 484, it was decided that where there was a mortgage of a railroad and its franchise, subsequently acquired property, both real and personal, immediately upon its vesting in the corporation, would, as incident, and by accession, become part of the thing originally mortgaged, and of the mortgage security; and therefore it was held that iron purchased by the corporation after such mortgage, and laid down upon the track, vested in the mortgagees, although it was agreed that persons who had paid the duties for which the United States had a lien upon the iron, should still have a lien on it and be authorized to take it up, until those duties were paid, unless the arrangement was made with the knowledge and assent of the mortgagees. A similar doctrine was held in respect to after-acquired real estate in Willock v. The Morris Canal Co., 3 Green Ch. Rep. (N. J.) 377.

Upon these views we see no objection to regarding such wood and lumber for the, purpose of taxation, as part of the railroad itself, as has been heretofore practiced, the same, indeed, as the rolling stock. This accords too, we think, with the policy of our legislature on this subject.

By the law of Dec. 27, 1844, ch. 141, it is enacted "that all real estate owned by any railroad corporation, except such as is used for their road and other ordinary and usual purposes of the corporation, and all real estate owned and occupied by such corporation, for their road, for which they have not expended any part of their capital stock in such manner as that the several towns through which such roads pass receive one fourth of one per cent, according to the provisions of chapter thirty-nine of the Eevised Statutes, shall be appraised and taxed in the several towns where the same may be located, in the same way as is bylaw provided for appraising and taxing real estate.”

In accordance with these provisions, real estate not used for the ordinary and usual purposes of the railroad, is taxed in the towns where it is situated, and the value deducted from the entire value as determined by the justices of the Supreme Judicial Court in the manner before stated. Independent of these provisions in the law of Dec., 1844, all such real estate for which the capital of the corporation had been expended, must have been taxed with the railroad itself; and as no similar provision was made for taxing wood and lumber in the towns where they happened to be, although they stood in relation to the railroad upon much the same footing as such real estate, it may fairly be inferred that there was no purpose to tax them otherwise than as part of the railroad-

It may be urged that the wood and lumber assessed in the case before us was not purchased with the capital expended, within the meaning of the law for taxing railroads, but with the earnings of the road. If this be true, as it undoubtedly is, still if the original stock on hand when the road went into operation was purchased with such capital, and that which has since been purchased went to supply the place of the first stock, we think it might well be regarded as standing in its place in respect to taxation in the same way as do the new rails and sleepers when laid down, and the new engines and ears.

Whether the first stock of wood and lumber was in fact purchased with any part of the capital does not appear in this case, and how it generally has been in other cases, we are not informed. It seems, however, quite probable that it has not been uniform; and the same may be said in respect to the rolling stock and other things belonging to the equipment of the road, and even in respect to the iron and other things pertaining to the superstructure. Indeed, in many instances the means obtained by the sale of shares has been wholly insufficient to construct and equip the road, leaving much to be done upon credit, or by money obtained by creating a debt, funded or floating, to be paid off by the future earnings of the road.

Still, although the superstructure and the rolling stock may have been paid for, ultimately, from the earnings of the road, we have no doubt that it must be regarded as in the nature of an expenditure of capital within the meaning of the law» These things are essential to the construction of the road, without which it cannot be put in operation, and whether the money by which they are paid for, be obtained by a sale of shares, or of bonds of the corporation, or even by means of a floating debt, it is equally an expenditure of capital within the meaning of the act.

As it is with the superstructure and rolling stock, so it is with the stock of fuel and lumber necessary for immediate use. It is apparent that for the complete equipment of the road such stock is as necessary as the engines and cars, or the machinery by which such fuel is prepared for use, and ordinary prudence would require that a stock equal to a year’s supply should be provided. This might properly be paid for out of the capital; otherwise it must be obtained on credit. If the first year’s stock be paid for out of the capital, the next year’s supply would naturally be obtained by the earnings of the road.

How the expenditures for the first year’s stock of fuel and lumber have been treated in making up the construction accounts of the various railroads we have not the means of knowing, but are inclined to think it has not been uniform.. But however this may be, we are of the opinion that, although it may be difficult to determine how these expenditures have been treated in making up these construction accounts, or even how they should be treated if the question were an open one, the practice of treating such wood and lumber as part of the railroad for the purposes of taxation, has been so uniform and so long continued, that it should not now be disturbed.

That such wood and lumber were so taxed at the time of the assessment in question by the selectmen of Mason, is unquestionable; that one of the assessments is wrong is equally clear: and, in view of the long and uninterrupted practice to tax them as part of the railroad, and the absence of any proof of a general practice to tax them in the towns, we must hold the assessment in question to be illegal.

But it is urged by the defendants’ counsel, that even if the wood and lumber had been purchased with part of the capital stock it would avail nothing, because the provisions of the law of July 4, 1860, ch. 2351, are inconsistent with the Revised Statutes, ch. 89, sec. 4, and in effect modify it in respect to the point in question. It must be remembered however, that by the law of 1846, ch. 332, (C. S. ch. 41, sec. 3,) wood and lumber were especially made liable to assessment, and so it has been ever since with various modifications ; and yet the practice of including it by the justices in the appraised value of the railroad has continued without interruption to the present time.

Nor do we think there is anything in the laws subjecting wood and lumber and other things of that description to taxation, from which a modification of the law in respect to the taxation of railroads can be implied. In the Revised Statutes the same chapter that provides for the taxation of railroads, provides that all carriages exceeding fifty dollars in value shall be taxed, and yet so far as we know, it has never been contended that railroad cars were subject to be taxed under this provision, although they might well be deemed to be carriages.

In fact the only convenient mode of taxing the property belonging to railroad corporations is the one adopted by the justices; to include all that goes to constitute the railroad, whether it be movable or immovable ; and this, we think, was in accordance with the legislative policy; and we can see no purpose to change it in the law providing in general terms for the taxation of wood and lumber to the owners; and these views are in accordance with the doctrine of Smith v. Bailey, 9 N. H. 423.

There must, therefore, be judgment for the plaintiffs for the amount so assessed and paid, with the costs as agreed, unless a trial by jury shall be elected.