Argument for Appellants.

196 U. S.

tion and assessment, and approved by the courts, to wit: the capitalization plan, whereby the total value of all the property of the corporation is fixed at a sum which at six per cent will produce the amount of the net income or earnings; the stock and bond plan, whereby the total value of all the property of the corporation is fixed at the market value of the shares of stock and bonds. Henderson Bridge Co. v. Commonwealth, 99 Kentucky, 641; S. C., 166 U. S. 152; Louisville Railway Co. v. Commonwealth, 105 Kentucky, 722; Adams Express Co. v. Kentucky, 166 U. S. 180; State Railroad Tax Cases, 92 U. S. 575; Commonwealth v. Covington & Cin. Bridge Co., 70 S. W. Rep. 849; West. Un. Tel. Co. v. Taggart, 163 U. S. 1.

Under either of these plans the value of the franchise or intangible property of the corporation may be ascertained by deducting from such total value the assessed value of its tangible property, the remainder being considered the value of its franchise or intangible property.

The share of Kentucky in the assessment of appellee's property was more than twenty-six per cent, the percentage adopted by the board of valuation and assessment, which erroneously included as a part of the lines of the road that appellee "operated, owned, leased or controlled" in that State and elsewhere 1,044.21 miles of road belonging to other companies, in which appellee merely owned one-half or a majority of the shares of stock. The road of another company in which appellee owns a majority of the stock is not "controlled" by the appellee within the meaning of the statute. United States v. Northern Securities Co., 120 Fed. Rep. 721; Pullman Palace Car Co. v. Mo. Pac. Railway Co., 115 U. S. 587; Porter v. Pittsburg &c. Co., 120 U. S. 670; Am. Preservers Co. v. Norris, 43 Fed. Rep. 714; Exchange Bank v. Macon &c. Co., 97 Georgia, 7; Atchison &c. Ry. v. Cochran, 43 Kansas, 234; Louisville Gas Co. v. Kaufman, 105 Kentucky, 131.

The complainant, by reason of the action of the county assessors and board of equalization or the board of valuation

196 U.S.

Argument for Appellee.

and assessment, has not been discriminated against or denied the equal protection of the laws within the meaning of the Fourteenth Amendment to the Constitution of the United States. King v. Mullins, 171 U. S. 436; Judson on Taxation, §§ 437, 562; Head Money Cases, 112 U. S. 595; National Bank v. Baltimore, 100 Fed. Rep. 27; Bell's Gap R. Co. v. Pennsylvania, 134 U. S. 233; Merchants' &c. Bank v. Pennsylvania, 167 U. S. 464; Col. & So. R. Co. v. Wright, 151 U. S. 478; Florida Central &c. R. Co. v. Reynolds, 183 U. S. 476; Kentucky Railroad Cases, 115 U. S. 321; Charlotte C. & A. R. Co. v. Gibbes, 142 U. S. 386; Wagoner v. Loomis, 37 Ohio St. 571; Lowell v. County Commissioners, 152 Massachusetts, 375; Cent. Railroad Co. v. State Board, 48 N. J. L. 7; Louisville Railway Co. v. Commonwealth, 105 Kentucky, 710.

Mr. James P. Helm, with whom Mr. Helm Bruce was on the brief, for appellee:

A State cannot through its administrative officers, intentionally, uniformly and systematically make some of its citizens bear, proportionately to their wealth, one-fifth more of the burdens of state government than it requires of all the rest of its citizens. Or, putting the proposition a little differently, it is not competent to the State to make a certain class of its citizens pay on the value of their property one dollar on the hundred, for the support of the State, and require of all the rest of the citizens that they should pay only eighty cents on the hundred dollars, for the same purpose. It cannot do this directly, and it ought to require no argument to prove that it cannot do it indirectly. In other words, great principles do not depend upon mere form, but on substance.

The lower court after a prolonged and most careful consideration of the evidence finds no room to doubt that the condition was the result of design. The language of the court is that all the property in the State subject to equalization, had been "systematically, habitually and intentionally undervalued to at least twenty per cent for the year 1902, first by

the local assessing officials and then by the equalizers." Spalding v. Hill, 86 Kentucky, 656; see opinion of Taft, J., in Taylor v. Louisville & Nashville Ry. Co., 88 Fed. Rep. 364, and authorities there referred to.

As to the effect of practical construction by those whose duty it is to execute a statute, see Harrison v. Commonwealth, 83 Kentucky, 163; Louisville v. Barbour, 83 Kentucky, 95; Clark's Run v. Commonwealth, 96 Kentucky, 532; City v. Garr, 97 Kentucky, 588.

As to the meaning of the word "controlled," see United States v. Northern Securities Co., 120 Fed. Rep. 721, and cases cited.

Appellants insist that the board of valuation and assessment assessed the property of the appellee at less than its real value. It surely could not be contended by the appellee that they were guilty of fraud or wrongdoing, in making the assessment, and it is not so contended. On the contrary they say that they in good faith endeavor to assess the property at its full and fair cash value. Under these circumstances the cases of P., C., C. &c. R. Co. v. Backus, 154 U. S. 434; West. Un. Tel. Co. v. Taggart, 163 U. S. 1; Adams Express Co. v. Ohio, 165 U. S. 2, are conclusive that whenever a question of fact is thus submitted to the determination of a special tribunal, its decision creates something more than a mere presumption of fact, and if such determination comes into inquiry before the courts, it cannot be overthrown by evidence going only to show that the fact was otherwise than was found and determined. On this branch of the case we do not feel justified in going into the evidence in detail for the purpose of showing that the valuation of the appellee's property fixed by the board of valuation and assessment was a full value. That question is fully discussed by the lower court in its opinion.

MR. JUSTICE HOLMES delivered the opinion of the court.

This is a bill brought by the railroad company, appellee, a

Kentucky corporation, against citizens of Kentucky, the members of the state board of valuation and assessment, and respectively auditor of public accounts, treasurer and secretary of state. The only ground of jurisdiction alleged is that under the tax laws of the State of Kentucky, as administered by its executive officers, the railroad company is deprived of the equal protection of the laws contrary to the Fourteenth Amendment. The constitution of the State requires all property not exempted from taxation to be assessed at its fair cash value, but the bill alleges that the county assessors uniformly assess the property assessed by them, which is the great body of tangible property in the State, below its cash value. It alleges that, in like manner, the board of equalization equalizes the county assessments at a percentage not above eighty per cent of the fair cash value of the property taxed. On the other hand the defendants, who assess the franchise tax on the railroad company, are alleged to have assessed the company's property in Kentucky at its full value, viz., $33,788,724.50, for the year 1902, and then, deducting the tangible property locally taxed, $23,103,825, to have made the taxable franchise $10,774,899.50. Whereas, if eighty per cent of the value of the company's property had been taken, then, deducting as before, the taxable franchise would be only a little over four million dollars.

The railroad company contends that when there is a uniform and general undervaluation of other property, then the only way in which the company can be put on an equality with other taxpayers is by a similar undervaluation in its case. The railroad company contends further that although this contravenes the letter of the statute, the requirement of equality so far outweighs the requirement of a tax on the full value of property, that if by misconduct elsewhere both cannot be observed, the rule of equality must prevail. It should be mentioned that the franchise tax is both state and local, and that after the same has been laid and apportioned between the State and county, etc., by the defendants, the

state auditor, who is one of them, certifies to the county clerks their proportion of the tax. The bill prays for an injunction against such an apportionment and certification, and also against collection by the officers of the State. There was a general demurrer to the bill and an answer and replication. The demurrer was overruled. Much evidence was taken, and at the final hearing a decree was entered by the Circuit Court enjoining the defendants as prayed, and requiring the defendant Hager, treasurer of the State, to execute a receipt in full of the state taxes on the franchise for 1902, the plaintiff having paid the sum which was due on its view of the case. 131 Fed. Rep. 282. The defendants appealed to this court. It may be assumed from an affidavit filed, if not from the pleadings, that the amount in controversy is over $2,000. See United States v. Trans-Missouri Freight Association, 166 U. S. 290, 310.

From a consideration of different kinds of evidence the Circuit Court reached the conclusion that the county assessors had systematically and intentionally undervalued the property assessed by them. In the first place it found a settled habit of undervaluing, recognized by the legislature and the state court, before the adoption of the Constitution of 1891, which required the fair cash value to be assessed. It found that while the value of land had increased or, at least, had not diminished since 1891, the assessments had varied very little, while those of 1891 were not more than seventy per cent of the value at any time. It considered testimony that from 1893 to 1896 the assessments were equalized at seventy per cent, following earlier statutes, notwithstanding the constitution of 1891. It then compared tabulated statements of sales in the different counties, which were required by statute to be furnished to the board of equalization, with the local assessments and with the results reached by the last named board. It thus found an additional and independent reason for believing that there was systematic undervaluation in the counties, and it inferred from comparisons and from testimony to that effect