N. Y. Rep.] Opinion of the Court, per WILLARD BARTLETT, J.

in the absence of such evidence, adopt 6% as a fair rate for the purpose of calculating the value of a special franchise under the net earnings rule.

(4) In valuing the tangible property of the relator, the land occupied by a portion of the plant was an important element. to be considered. The referee allowed a return only upon the original cost of such land ($25,162.01) instead of upon its present value ($71,018.28). He argues that the value of the special franchise is not augmented by the increase in the value of the land. Where, however, the value of a special franchise is to be ascertained by the application of the net earnings rule, which involves a capitalization of the surplus, it must be assumed that the present owners are entitled to a reasonable return upon the value of their property now. A stockholder who has recently acquired his stock will probably have paid an increased price therefor by reason of the increase in the market value of the very land in question. The taxes upon this land are based upon the present value, not upon its cost to the corporation when originally acquired. So we think its present value must be taken into account in applying the net earnings rule to the valuation of the special franchise. If, as is suggested might occur in some supposed cases, this would result in giving a special franchise no taxable value at all, that would be a conclusive reason for rejecting the net earnings rule in such cases and would demand the adoption of some other method of valuation. A similar question arose in Willcox v. Consolidated Gas Co. (supra), where it was argued that the basis of valuation of the land occupied by the plant of the Consolidated Gas Company should not exceed its cost to the company, but the Supreme Court of the United States said: "We concur with the court below in holding that the value of the property is to be determined as of the time when the inquiry is made regarding the rates. If the property, which legally enters into the consideration of the question of rates, has increased in value since it was acquired, the company is entitled to the benefit of such increase. This is, at any rate, the general rule.

We

Opinion of the Court, per WILLARD BARTLETT, J. [Vol. 196.

do not say there may not possibly be an exception to it, where the property may have increased so enormously in value as to render a rate permitting a reasonable return upon such increased value unjust to the public. How such facts should be treated is not a question now before us, as this case does not present it." (p. 52.)

We now come finally to the question of equalization. The writ of certiorari alleged that the assessment of the relator's special franchise was unequal because other property in the county of Queens was assessed at 89% of its real value, whereas the property of the relator for the purposes of the special franchise tax was assessed at its full value, being 11% higher than the assessment made on other property on the same roll in the same county. The referee and the court at Special Term determined that this allegation was true, finding that the ratio of assessed value to the actual or real value of the real estate in the borough of Queens in the year 1907 was 89%. The referee disregarded this inequality because he thought that even if the assessments were to be equalized at 89%, as demanded by the relator, the valuation of the special franchise fixed by the state board of tax commissioners might nevertheless be sustained. The Appellate Division, however, took a different view and held that 11% of the value of the special franchise as determined by the state board of tax commissioners should be deducted therefrom in order to equalize it with the assessed value of other property.

Under section 250 of the Tax Law (as the sections were then numbered, now section 290, chap. 60 of the Consolidated Laws) any person assessed upon any assessment roll might petition for a writ of certiorari on the ground that the assessment was unequal because it had been made at a higher proportionate value than the assessment of other property on the same roll by the same officers. By section 45 of the same statute (now section 46) it was provided that an assessment of a special franchise by the state board of tax commissioners might be reviewed in the manner prescribed by the

N. Y. Rep.] Opinion of the Court, per WILLARD BARTLETT, J.

article containing section 250, and that article was made applicable "so far as practicable to such an assessment, in the same manner and with the same force and effect as if the assessment had been made by local assessors." It is contended in behalf of the appellants that these provisions did not suffice to entitle the relator to have the assessment of its special franchise equalized with the assessed valuation of real estate in the same county because the assessments are not made by the same officers, the valuation of the special franchise being fixed by the state board of tax commissioners while the valuation of other property on the same roll is made by the local assessors. This proposition would be unanswerable were it not for another provision in the Tax Law which was added thereto after the amendment providing for the taxation of special franchises (Laws of 1900, chap. 254). Section 42 of the Tax Law was then amended. so as to provide as follows: "The valuation of every special franchise as so fixed by the state board shall be entered by the assessors or other officers in the proper column of the assessment roll before the final revision and certification of such roll by them, and become a part thereof with the same force and effect as if such assessment had been originally made by such assessor or other officer." This provision is re-enacted in the present Tax Law (Consolidated Laws, chap. 60, 43). When read in connection with section 250 it amounts practically to a direction that for purposes of review upon certiorari the valuation of a special franchise shall be treated as though it had been fixed by the same officers as those who made the other assessments upon the roll. It is difficult to perceive what other effect can be given to the command that such valuation shall "become part thereof with the same force and effect as if such assessment had been originally made by such assessor or other officer."

During the ten years that have elapsed since special franchises were first rendered liable to taxation in this state, the courts with a single exception appear to have acted upon the assumption that a special franchise tax was open to attack by

Opinion of the Court, per WILLARD BARTLETT, J.

[Vol. 196.

the statutory writ of certiorari on the ground that such franchise had been assessed at a higher proportionate valuation than other property on the same roll. The Appellate Division in the third department ruled expressly to this effect in the case of People ex rel. Rochester Telephone Co. v. Priest (101 App. Div. 223). Our attention is called to only one reported case holding the contrary -- a decision rendered at a Special Term of the Supreme Court in Albany county. (People ex rel. New England Telephone Co. v. Woodbury, 63 Misc. Rep. 1.) Irrespective of the reasoning in either of these cases, however, and as matter of authority, preference must be given to the conclusion reached by the Appellate Division that a corporation taxed upon its special franchise is entitled to assail the assessment on the ground of inequality. An exami nation of the record in the leading cases involving the constitutionality of the tax upon special franchises in this state shows that this court has directly passed upon the question now under discussion. (People ex rel. Metropolitan Street [Ry. Co. v. State Board of Tax Commissioners, 174 N. Y. 417, 431.)

Those cases were tried before the Hon. ROBERT EARL as referee. In a series of extremely able opinions, from one of which a quotation has already been made, that learned judge discussed and determined all the important issues presented by that very complicated and interesting litigation. In one of these opinions, discussing a number of general objections to the assessments which had previously been considered, he said: "These franchises were all assessed at what these officers deemed to be their full and true value, while other real estate in the municipalities in which these franchises are operated was assessed by the local assessors at less than its full and true value, and so these assessments will have to be reduced at least so much as will equalize them with the other assessments in the same localities. In New York the assessment of other real estate was sixty-seven per cent of its full and true value; in Kings, sixty eight per cent; in Queens, eighty per cent; in Richmond, sixty-six per cent, and in Westchester, ninety

N. Y. Rep.] Opinion of the Court, per WILLARD BARTLETT, J.

per cent." This passage in Judge EARL's opinion was followed by an express finding of fact that other real estate in the city of New York was assessed at only sixty-seven per cent of its actual and true value and by a conclusion of law that to equalize its assessment with the assessments of other real property in the city of New York the relator was entitled to a very large deduction from its assessment.

Here we have an express finding made by a referee in a certiorari proceeding under the Tax Law for which there was absolutely no authority or basis unless that statute permitted. the court in such a proceeding to reduce the assessment of a special franchise upon the ground of inequality. The final order in the proceeding followed the findings. That order, it is true, was reversed by the Appellate Division (People ex rel. Metropolitan Street Ry. Co. v. State Board of Tax Commissioners, 79 App. Div. 183); but when the case came to this court the order of the Appellate Division was in turn reversed and the judgment of the Special Term affirmed. By this affirmance the Court of Appeals necessarily sustained the referee's findings made by Judge EARL to which we have referred and which could only be approved on the ground that under the Tax Law the assessment of a special franchise may be reduced so as to equalize it with other assessments in the same locality.

There seems to be no occasion for any further discussion of a question which appears so clearly to be settled by authority. The state board of tax commissioners and other critics of that portion of the Tax Law relating to special franchises have frequently recommended that the power to reduce for inequality should be conferred upon that board itself instead of being confined in its exercise to the court in certiorari proceedings, but this is a matter in regard to which the legislature alone can grant relief.

The views which have been expressed may prove useful to the assessing officers in all cases where they see fit to apply the net earnings rule to the valuation of special franchises, and will, at all events, be serviceable as a guide to the disposition