Atlantic & St. Lawrence Railroad v. State

"Every railroad corporation * * * shall pay to the state an annual tax upon the actual value of the road, rolling-stock, and equipments." G. L., c. 62, s. 1. The plaintiffs are lessors, and the Grand Trunk Railway Company are lessees, of a railroad running from Portland to Canada, through Maine, New Hampshire, and Vermont. The lease was made in 1853 for 999 years. The personal property used in operating the road belongs to the lessees; and the questions raised by the referees' report relate to the taxation of so much of the leased real estate as is situated in New Hampshire.

I. "Real and personal property shall be taxed to the person claiming the same, or to the person who is in the possession and actual occupancy thereof, if such person will consent to be taxed for the same; but such real estate shall be taxed in the town in which it is situate." G. L., c. 54, s. 11. If this section is applicable to railroads, its effect is controlled in this case by the law of tax appeals, which directs such appeals to be disposed of by such orders as justice may require. G. L., c. 61, s. 9. When the property of an incorporated owner of a railroad highway is an estate of perpetuity, a lease of it for 999 years may be regarded, for many practical purposes, as a conveyance of the whole estate upon the condition subsequent of payment of an annuity called rent. 4 Kent Com. 85, 107; Denn v. Barnard, Cowp. 595, 597. And this road may be lawfully taxed, either to the lessors, because they may be regarded as, in some technical sense, the owners of the road, or to the lessees, because, as tenants for 999 years, they are the owners in some practical sense, and, requesting to be taxed for it, they could not object if their request were complied with. Practically and legally, it is immaterial whether it is taxed to the lessors or the lessees Whether is is taxed to the former or the latter, the same real estate (including the franchise, Robinson v. Dover, 59 N.H. 521,527) is assessed, its value is the same, and its tax is the same, and is paid by the same corporation, the lessees, who by the terms of the lease are bound to pay it. And an assessment of it, either to the plaintiffs or to the lessees, would no just cause of abatement. Carpenter v. Dalton, 58 N.H. 615.

II. The value of the New Hampshire part of this road may not be so easily ascertained as the value of a farm; but the law of the appraisal of each is the same. The difficulty in this case, arising from the character and situation of the property, is a difficulty of fact and not of law. The actual value of the road at a particular time is a fact to be found for the purpose of finding what was then its share of the public expense. That time was the first day of April, 1879. And its actual value on that day was its market value on that day. Cocheco Co. v. Strafford, 51 N.H. 455, 467,475-482. The market value of a leased farm does not depend, in the slightest degree, upon the question whether it is assessed, in the selectmen's book, to the lessor or to the lessee. To be of the value of $2,000, it must be capable of being sold for that sum at a fairly conducted sale, at a sale conducted with reasonable skill and diligence in respect to time, place, and circumstances, for the purpose of obtaining the highest price. State v. James, 58 N.H. 67. The difficulty in appraising this road is in estimating, upon a variety of circumstantial evidence, what is the highest price it could have been sold for on the first day of April, 1879. If it had been sold or leased on that day, under circumstances favorable for showing its market value, evidence of the price for which it was then sold or leased would be the best. It would be simple, direct, and satisfactory. In the absence of such evidence the referees must resort to evidence less simple, less direct, and perhaps less satisfactory.

The market values of some roads are shown by their earnings, the profits made by those who operate them. It is claimed that the evidence on this point shows that the market value of the New Hampshire part of this road is less than nothing, that part being run at a loss. This is a point to be thoroughly investigated. The question of profit or no profit is one of fact, to be decided upon all the evidence that both parties produce. If no net profit is derived from the operation of the road, it does not necessarily follow that the road has no market value. A railroad that makes no profit by the transportation of freight and passengers, may be of some value for increasing the business of other roads, or being useful in some other way. Queen v. London N.W. R. Co., L. R. 9 Q. B. 134. The fact that net earnings are or are not derived from the transportation of freight and passengers is, of course, material evidence on the question of the value of the road. If the road is so situated, and in such a condition, that without net earnings it can in a fairly managed market be sold or leased at some price, that price is evidence on the question of value.

The road is a public highway that cannot be discontinued without legal authority. McDuffee v. R. R., 52 N.H. 480, 449. And the fact that, if it should be discontinued, some of its materials might be removed (provided they did not revert to the owner of the soil where the right of way was taken by process of law or equivalent conveyance), is a piece of evidence depending for its weight upon various considerations, one of which would be the probability of a discontinuance of the road being authorized. The value of iron rails might be destroyed by making them a part of a worthless road that could not be dismantled and abandoned.

The case is as if a citizen of Concord were the lessor of the road, and another citizen of Concord were the lessee, neither of them being a corporation, or each being a corporation sole, without corporate stock or shares. The rent is the plaintiffs' money when they receive it. But their assessment in this case is made under a statute that imposes, not a tax upon the money of the plaintiffs and all other persons, or upon the income of the plaintiffs and all other persons, or upon the profit of all executed or executory contracts, but a tax upon real estate, which, in this case, would probably be of trifling value without the public franchise of maintaining a track across rivers and other highways. The taxable value of the road is the market value which the defendant would pay for it if it were taken from its owners by the defendant for free public use, as turnpikes and toll-bridges have been taken, by an exercise of the power of eminent domain. Crosby v. Hanover, 36 N.H. 404, 420; Edmands v. Boston,108 Mass. 535, 544; Burt v. M. Ins. Co., 115 Mass. 1, 15.

A sale or lease of the road, made at any time, is admissible evidence on the question of its value at that time; and its value at any time, not too remote, is admissible evidence on the question of its value in 1879. If a sale or lease of it had been made in 1878, it might be a valuable piece of evidence. The more remote the sale or lease from April 1, 1879, the less weight it is entitled to. Substitute for the road a farm, leased in 1853 for 999 years, at $100 annual rent, to be appraised at its actual value on the first day of April, 1879: the selectmen might regard the rent which, in 1853, the lessor agreed to take and the lessee promised to pay, as evidence of what the contracting parties then thought the farm was worth, and its value at that time as evidence of its value in 1879. They might consider such evidence as of great, or little, or no importance. They might find the rent was too high, or too low, or precisely what the use of the farm was worth when the lease was made. They might find the farm, or its use, was worth at that time twice as much as in 1879, or only half as much; and they would not supposes themselves justified in appraising the farm at twice its value, or at half its value, because twenty-six years before it had been sold or leased for twice as much, or half as much, as it was worth at the time of their appraisal. As the lease would be nothing more than evidence of what the parties thought the farm was worth when they made the lease, it would have no greater weight as evidence than a sale made by the same parties at the same time. A conveyance of the farm in the afternoon of April 1, 1853, for 999 years, would not be greater proof of its value, than a conveyance of it in the forenoon of the same day in perpetuity.

By a lease of a horse for a number of years at $20 a year, a part of the title, a special property, passes from the lessor to the lessee. If the use of the horse turns out to be worth more, or less, than $20 a year, his taxable value is not affected by that circumstance. If the use is worth $10 a year more than the lessee pays, the lessor's annual loss of the $10 does not decrease the market value of the animal. If the use is worth $10 a year less than the lessee pays, the $10 thus annually gained by the lessor becomes his taxable money, when he gets it, but does not become a part of the leased property, or an element of its market value. The gain of one party is the loss of the other; and the horse is not worth more, or less, by reason of the balanced loss and gain of the owners of the two parts of the title.

If the value of this leased road increased from the date of the lease to the present time, the less value of 1853 cannot be taken as its present value on which its present share of the public expense to be computed; and if its value diminished during that period, its greater value in 1853 is not the test of its present share of the common burden. For the purpose of taxation in 1853, it should have been appraised at the highest price it could have been fairly sold for on the first day of April of that year. For the purpose of taxation this year, it should be appraised at the highest price it could have been fairly sold for on the first day of April of this year, and not at the greater or less price for which it could have been sold or leased at some former time. The price at which it was sold or leased at any former time is evidence only so far as its proof of a former value tends to show the price for which it could have been sold on the first day of April, 1879. If, on that day, it could not have been leased by an owner of the entire title at the price of 1853, it would be as wrong to make that price the test of the value of 1879 as to appraise it now at less than its present value because it was once sold or leased for less than it is now worth. Let every owner of real estate insist upon its being now taxed, not at its present market price, but at the least price at which it ever was or ever could have been sold or leased, and let assessors tax all real estate, not at its present market price, but at the highest price at which it ever was or ever could have been sold or leased, and, in the conflict between the land-owners on one side and the assessors on the other, the error of both sides would be apparent.

If the conveyance of 1853, for 999 years, had been a conveyance in perpetuity for a sum of money paid at the times and that money put at interest had continued to this day to produce an income for the plaintiffs equal to the rent stipulated in the lease, and the road were not now worth that sum, it would not now be appraised at the price of 1853. If the price had been, not a round sum paid at the time of sale, but an annuity to be paid, the annuity would be no better evidence of the value of the road than a single equivalent sum paid as the price. As the annuity would not be evidence, except so far as it tended to show what the road was worth in 1879 by proving what it was worth at the time of the sale, the market value of the annuity in 1853 would need to be known. The only difference between the evidence of a round sum paid in 1853, and the evidence of an annuity then agreed to be paid for 999 years, or forever, would be in the necessity of finding for what round sum the annuity could have been sold in 1853.

If the conveyance of 1853 for 999, years be regarded as a lease and not as a conveyance in perpetuity, the case is governed by the same law. Let the lease be regarded as a transfer that splits the title in two parts, by conveying one part to the lessees and leaving the other in the lessors. It did not make the two parts greater, or less, than their sum. The separation of the parts took place instantaneously at the delivery of the lease. Immediately after that point of time, the part held by the plaintiffs and the part held by the lessees were no more and no less than they were immediately before, when the plaintiffs held them both undivided. The partition of the title did not make the road anything more, or less, than the road, or its market price anything more, or less, than its market price. The mere division of the title was not an augmentation or diminution of its value.

If the lease is a better bargain for the lessors than for the lessees, the lessees lose what the lessors gain. The neutralization of the loss and gain does not diminish or increase the value of the road. If the lessors' gain could enhance the value of their part of the title, the lessees' loss would diminish the value of their part to the same extent. The road, plus the lessors' gain, less the lessees' loss, would be equal to the road. If it could be said that the lessors' part of the title is worth $10 more than the whole of it, it must also be said that the lessees' part is worth $10 less than nothing. The positive quantity, balanced by the negative, would give the equation the same significance it would have if the lease were a better bargain for the lessees than for the lessors. If a conveyance of the entire title would vest in the buyer the lessors' right to receive the rent, it would also vest in him the lessees' obligation to pay it.

If leased property were appraised above its value when the lease, twenty-six years after its date, becomes a better bargain for the lessor than for the lessee, it would be appraised below its value when the lease becomes a better bargain for the lessee than for the lessor. Were the former value the test when higher than the present value, it would be the test when lower. It is not the test in either case. The lease is evidence, but not conclusive proof, on the question of the value of the road in 1853. That value, when found, is evidence, but not conclusive proof, on the question of the value of the road in 1879; and the weight of this and all other evidence is a matter of fact to be determined by the referees.

Report recommitted.

All concurred.