141 U.S.

40
11 S.Ct. 889
35 L.Ed. 628

ATTORNEY GENERAL OF COMMONWEALTH OF

MASSACHUSETTS
v.
WESTERN UNION TEL. CO., (three cases.)
May 11, 1891.

H. C. Bliss, Dy. Atty. Gen., for the Commonwealth.

Wager Swayne, for defendant.
GRAY, J.

Three informations in equity were filed in the supreme judicial court of

Massachusettes by the attorney general at the relation of the treasurer of the
commonwealth, against the Western Union Telegraph Company, a corporation
of New York, under section 54 of chapter 13 of the Public Statutes of
Massachusetts, for the recovery of taxes assessed to the defendant for the years,
1886, 1887, and 1888 under other sections of that chapter, and interest thereon
at the rate of 12 per cent. a year until paid, and for an injunction against the
defendant's prosecution of its business until payment of such taxes and interest.
Upon petition of the defendant, alleging that the matter in dispute arose under
the constitution and laws of the United States, the three suits were removed into
the circuit court of the United States, and were there heard upon pleadings and
proofs, and decrees entered for the amounts of the taxes and interest, deducting
certain sums paid into court by the defendant, and granting no injunction. Both
parties appealed to this court. These cases cannot be distinguished from that of
Telegraph Co. v. Massachusetts, 125 U. S. 530, 8 Sup. Ct. Rep. 961, in which
the validity of similar taxes was upheld in a judgment delivered by Mr. Justice
MILLER, with no dissent. The constitution of Massachusetts, c. 1, 1, art. 4,
empowers the legislature 'to impose and levy proportional and reasonable
assessments, rates, and taxes upon all the inhabitants of, and persons resident
and estates lying within, the said commonwealth; and also to impose and levy
reasonable duties and excises upon any produce, goods, wares, merchandise,
and commodities whatsoever, brought into, produced, manufactured, or being

within the same.' 1 Charters and Constitutions, 961. The statutes pursuant to
which the taxes now in question were assessed and sought to be collected are
set forth in full in 125 U. S. 531-534, note, 8 Sup. Ct. Rep. 961, and the
material provisions of them are as follows: By section 38 'every corporation
chartered by the commonwealth or organized under the general laws for
purposes of business or profit, having a capital stock divided into shares,' (with
certain exceptions,) shall annually return to the tax commissionera l ist of its
shareholders and the number of shares belonging to each, the amount of its
capital stock, the par value and market value of the shares, and the locality and
value of its real estate and machinery subject to local taxation within the
commonwealth; and 'railroad and telegraph companies shall return the whole
length of their lines, and the length of so much of their lines as is without the
commonwealth.' By section 39 the tax commissioner shall ascertain the true
market value of the shares of each corporation, and estimate the fair cash
valuation of all the shares constituting its capital stock, and shall also ascertain
and determine the value of its real estate and machinery subject to local
taxation, and of the deductions provided in section 40. By section 40 'every
corporation embraced in the provisions of section thirty-eight shall annually
pay a tax upon its corporate franchise at a valuation thereof equal to the
aggregate value of the shares in its capital stock as determined in the preceding
section, after making the deductions provided for in this section, at a rate
determined by an apportionment of the whole amount of money to be raised by
taxation upon property in the commonwealth during the same current year,'
'upon the aggregate valuation of all the cities and towns for the preceding year.'
'From the valuation ascertained and determined as aforesaid there shall be
deducted First, in case of railroad and telegraph companies whose lines extend
beyond the limits of the commonwealth, such portion of the whole valuation of
their capital stock, ascertained as aforesaid, as is proportional to the length of
that part of their line lying without the commonwealth, and also an amount
equal to the value, as determined by the tax commissioner, of their real estate
and machinery located and subject to local taxation within the commonwealth:
second, in case of other corporations, included in section thirty-eight of this
chapter, an amount equal to the value, as determined by the tax commissioner,
of their real estate and machinery subject to local taxation, wherever situated.'
By section 42 'every corporation or association chartered or organized
elsewhere which owns, or controls and uses, under lease or otherwise, a line of
telegraph within this commonwealth,' shall make all the returns prescribed by
section 38 excepting the list of shareholders, 'and shall annually pay a tax at the
same rate, and to be ascertained and determined in the same manner,' as is
provided in section 40. By section 54 taxes assessed under sections 40 and 42
may be recovered, 'with interest at the rate of twelve per cent. per annum until
the same are paid,' by action in the name of the treasurer of the commonwealth,
or by information at his relation in the supreme judicial court. It is to be

remembered that by the tax act of Massachusetts 'taxes on real estate shall be
assessed in the city or town where the estate lies;' and 'all machinery employed
in any branch of manufacture shall be assessed where such machinery is
situated or employed; and, in assessing the stockholders for their shares in any
manufacturing corporation there shall first be deducted from the value thereof
the value of the machinery and real estate belonging to such corporation.' Pub.
St. Mass. c. 11, 13, 20. Although it is hard to see how telegraph companies
can have 'machinery employed in any branch of manufactures,' unless they
make their own machines, yet railroad corporations, which are coupled with
telegraph companies in the statutes in question, as well as other corporations
embraced in those statutes, might have such machinery. The effect of the
statutes complained of is that every telegraph company, whether incorporated
in Massachusetts or elsewhere, owning a line of telegraph in Massachusetts, is
to be there taxed on such proportion only of the whole value of its capital stock
as the length of its line in Massachusetts bears to the whole length of its lines
everywhere; and, to prevent its whole tax in Mssa chusetts from amounting in
any event to more than that, it is provided that from the taxable portion of the
value of its capital so ascertained shall be deducted the value of any property
owned by it in Massachusetts which is subject to local taxation in the cities and
towns. Such being the real state of the case, all the objections to the validity of
the tax are met and disposed of by the decision of this court in the former case
between these parties. In that case, as in this, the telegraph company, while
admitting that its property in the state of Massachusetts was subject to taxation
there like other property, argued that by reason of its having accepted the
provisions of the act of July 24, 1866, c. 230, (14 St. 221,) now embodied in
sections 5263-5269 of the Revised Statutes, and having thus acquired under
section 5263 'the right to construct, maintain, and operate lines of telegraph
through and over any portion of the public domain of the United States, over
and along any of the railways or post-roads of the United States, and over,
under, or across the navigable streams or waters of the United States,' it had a
franchise from the United States which could not be taxed by any state through
which its lines ran; that the statutes of Massachusetts in terms and effect
undertook to tax the franchises of the corporation; and that the tax was
unconstitutional and void, both as interfering with interstate commerce and as
being unequal and excessive. But this court, in answering that argument and
upholding the validity of the tax, affirmed, the following propositions: The
franchise of the company to be a corporation and to carry on the business of
telegraphing was derived, not from the act of congress, but from the laws of the
state of New York under which it was organized; and it never could have been
intended by the congress of the United States, in conferring upon a corporation
of one state the authority to enter the territory of any other state and to erect its
poles and lines therein, to establish the proposition that such a company owed
no obedience to the laws of the state into which it thus entered, and was under

no obligation to pay its fair proportion of the taxes necessary to the support of
the government of that state. 125 U. S. 547, 548, 8 Sup. Ct. Rep. 961. By
whatever name the tax may be called, as described in the laws of Massachusetts
it is essentially an excise upon the capital of the corporation; and those laws
attempt to ascertain the just amount which any corporation engaged in business
within its limits shall pay as a contribution to the support of its government
upon the amount and value of the capital so employed by it therein. 125 U. S.
547, 8 Sup. Ct. Rep. 961. The tax, though nominally upon the shares of the
capital stock of the company, is in effect a tax upon that organization on
account of property owned and used by it in the state of Massachusetts, and the
proportion of the length of its lines in that state to their entire length throughout
the whole country is made the basis for ascertaining the value of that property.
Such a tax is not forbidden by the acceptance on the part of the telegraph
company of the rights conferred by section 5263 of the Revised Statutes or by
the commerce clause of the constitution. 125 U. S. 552, 8 Sup. Ct. Rep. 961.
The statute of Massachusetts is intended to govern the taxation of all
corporations doing business within its territory, whether organized under its
own laws or under those of some other state; and the rule adopted to ascertain
the amount of the value of the capital engaged in that business within its
boundaries on which the tax should be assessed is not an unfair or unjust one,
and the details of the method by which this was determined have not exceeded
the fair range of legislative discretion. 125 U. S. 553, 8 Sup. Ct. Rep. 961. That
decision was cited by the court in Ratterman v. Telegraph Co., 127 U. S. 411,
426, 427, 8 Sup. Ct. Rep. 1127, and in Leloup v. Port of Mobile, 127 U. S. 640,
649, 8 Sup.Ct. Rep. 1380.
2

The other questions argued relate to the amounts for which decrees were
entered. In each case the defendant admitted its liability to pay a tax on the
actual value, as stated in its answer, of its real and personal property within the
state, and tendered and paid into court the sum so admitted to be due, with
interest thereon at the rate of 12 per cent. and costs. The sum so paid in was
greater than like interest then accrued on the whole amount of the tax assessed
and sued for. The court added to the whole amount of the tax sued for interest
thereon at the rate of 12 per cent. to the date of the payment into court,
deducted from the sum so ascertained the sum paid in, and entered a decree for
the balance, with interest thereon at the rate of 12 per cent. from the date of
such payment to the date of the decree, and thereafter until payment of interest
on the amount of the decree at the rate of 6 per cent., that being the usual rate
of interest in Massachusetts. It is contended in behalf of the state that the tender
and payment into court could have no effect in a suit of this kind to recover a
tax, with interest thereon at the rate of 12 per cent. in the nature of a penalty,
and that such interest must be computed at that rate, not merely to the time of

the decree below, but to the time of payment, or at least to the time of the final
decree in this court. On the other hand it is contended that the sum paid into
court should have been applied, according to the evident intention of the
defendant in paying it, to both principal and interest of the sum admitted to be
due, instead of applying it to interest on the whole claim sued for, and thereby
increasing the sum on which to compute subsequent interest. We are of opinion
that in this matter the defendant is right. In equity, at least, the defendant was
entitled to the benefit of the sum paid into court. That sum should have been
applied to that part of the principal sum and interest which was admitted to be
due. After the payment into court, as before, interest at the rate of 12 per cent.
was to be computed on the rest of the principal. The penal rate of 12 per cent.
interest ran only until the amount to be recovered was judicially ascertained.
Since the date of the decree below interest is to be computed on the lawful
amount of the decree at the rate of 6 per cent. only. In each of the three cases,
therefore, the entry must be: Decree reversed and case remanded, with
directions to enter a decree for the amount of the tax found due by the circuit
court, but applying the sum paid into court and computing interest on the
balance, in accordance with the opinion of this court; the costs in this court to
be equally divided between the parties.
3

FIELD and HARLAN, JJ., dissent.