State v. Virginia & Truckee Railroad

By the Court, Belknap, C. J.: This is the second appeal in this case. (46 Pac. 723.) Appellant made the statutory statement to the assessor fixing the value of its main and side track in Washoe county at $131,800. Notwithstanding this it was assessed at $254,200. The answer alleged -that the assessment was out of proportion to and above the actual cash value of the property, in compliance with the statute permitting this defense. (Stats. 1895, p. 139.) [79] The jury found the value to be $212,200. This is exclusive of rolling stock and other property valued at $19,900, concerning which there was no controversy. Judgment was entered upon the verdict together with penalties, and from the judgment and an order denying a motion for hew trial an appeal has been taken. The record of the former trial does not show that any point was made touching the time of the commencement of the fiscal year — whether in July or January. It seems to have been assumed upon that trial that it commenced upon the first day of July for the purpose of taxation of railroads. The district court instructed the jury that the fiscal year for the purpose of taxation commenced upon January 1st, and there does not appear to be any serious contention concerning the correctness of the instruction. Upon the former appeal it was decided that the value of the railroad for the purposes of taxation should be determined mainly by its net earnings capitalized at the current rate of interest. In that case it was shown without contradiction that the current rate of interest was eight per cent per annum. In this, it was shown that the rate for loans was not lower than eight per cent, but for investments the rate was six per cent. Money or capital laid out in a permanent form, as in the construction of a railroad, the jury may have concluded was in the nature of an investment and not of a temporary loan, and the rate of interest should be the same as investments command. There was evidence to support either view of the case, and, as all intendments must be taken in support of the verdict in the absence of any express finding to the contrary, we conclude that the jury found the rate of interest to be six per cent per annum. Appellant claims that its net income as shown by its books was not greater than $28,038 58. Respondent, in support of the judgment, claims that items omitted by appellant should be included in its income and that a greater income should be taken as the basis of capitalization. It will only be necessary to consider one of these matters. A reduction of the pay of the officers and employees of the company was effected in the month of May, 1896, by which the operating expenses of the road were reduced at the rate [80] of $13,839 per annum. It was shown without contradiction that appellant did not necessarily require more officers and employees in the year 1895 than it did in the year 1896. Under this showing it was competent for the jury to have found that the operating expenses of the year 1895 could have been by economical management reduced to the rate that had been subsequently established in 1896. The instruction given to the jury by the court upon its own motion upon this subject appears to be entirely unobjectionable. It is as follows: “You are instructed that the net income of a railroad company when necessary to be determined for purposes of taxation, is the difference between the gross receipts and necessary expenses under reasonably economical and prudent management. By reasonably economical and prudent management is meant a management conducted Avith that care, diligence and attention which an ordinarily prudent and careful person, qualified to perform such) would take and exercise if the property so managed was his own. In any particular case, the gross receipts to be considered for said purpose, are not, necessarily, the receipts which were in fact received, but such receipts as would be received under a reasonably economical and prudent management; and the expenses to be deducted, in order to determine the net income, are not, necessarily, the expenses which were in fact incurred, but such expenses as would be incurred under a reasonably economical and prudent management.” Adding the sum of $13,839 to $28,038 we have as the net income of the road, in round numbers, $42,000. This sum capitalized at six per cent represents about $700,000, as the value of the entire road. Washoe county’s proportion is about $260,000. As the value of the entire property in the county as fixed by the jury did not exceed $232,100 the property was not overvalued. It is claimed that the penalties imposed by the statutes in tax cases are not legally enforceable in the present case because the assessment was rendered void by the verdict. Under the act of March 9, 1895 (Stats. 1895, p. 39), it is declared that “ where the, defense is based upon the ground that the assessment is abovevthe Aralue of the property, the defense shall only be effectual as to the proportion of the tax [81] based upon such excess, but in no case shall an entire assessment be declared void.” And section 48 of the revenue law (Stats. 1891, p. 150) requires that, “in all suits brought for the collection of delinquent taxes, as provided for in the preceding section, the complaint and summons shall demand, and the judgment shall be entered for, twenty-five per centum in addition-to the tax of ten per centum thereon and costs; and such tax, penalty and costs shall not he discharged, nor shall the judgment therefor be satisfied, except by the payment of the tax, original penalty, costs, and the additional penalty herein prescribed in full.” These provisions of the statutes answer appellant’s contention. Other points were argued by counsel, but in the view we - take of the case they are not necessary to be considered. The judgment and order are affirmed.