
    No. 12,073.
    State ex rel. St. Charles Street Railroad Company vs. Board of Assessors et als.
    Under the statute the earning capacity of the plaintiff company forms a basis for estimating values.
    The assessment was made by taking gross earnings and deducting therefrom the cost of operating the road.
    
      Held, that payment of debts secured by bond and mortgage of a date long anterior was not a running annual expense; that under the terms of the. statutes it was not deductable from the gross annual earning of the year, to fix the net earning and the consequent value at the time, of the franchise. Franchises are property (32 An. 915; Board of Liquidation vs. City of New Orleans; Railroad Co. vs. Delamore, 34 An. 1228; New Orleans, Spanish Fort & Lake Rail" road Company vs. Delamore and Another, 114 XT. S. 505; City of New Orleans vs. Railroad Company, 40 An. 588; New Orleans City & Lake Railroad Company vs. City of New Orleans el als., 44 An. 1055), and amounts applied irom the gross receipts to the payment of property'bought many years prior,'are taken account of in fixing net revenues.
    ‘The franchise was bought for cash; the amount needed to this end was borrowed at the time, and is now bonded and paid from year to year. These past liabilities are not annual expenses of operation, lessening annual revenue. The liability on property does not, in assessing, constitute an offset.
    APPEAL from the Civil District Court for the Parish of Orleans. Théard J.
    
    
      Harry H. Hall for Plaintiff, Appellant.
    
      W. B. Sommerville, Assistant City Attorney, and Samuel L. Gilmore, City Attorney, for Defendants, Appellees.
    Submitted on briefs June 6, 1896.
    Opinion handed down June 15, 1896.
    Rehearing refused June 29, 1896.
   The opinion of the court was delivered by

Breaux, J.

The relator, alleging that it had made application to the Board of Assessors to reduce its assessment, also to the committee of the Common Council on the revision of assessments for a reduction of its assessment, sued for a writ of mandamus against the Board of Assessors to reduce upon the assessment rolls for the State and parish, for the year 1895, the assessment of its franchise from eight hundred and sixteen thousand and two hundred dollars to five hundred and sixty-six thousand dollars.

The facts are that the plaintiff paid three hundred thousand dollars •cash for its franchise. It afterward issued bonds for this amount payable annually, at the rate of fifteen thousand dollars.

The dividends for 1894, a basis for the assessment of 1895, was.................... $43,752 00,
Amount paid on the bonds............................................................................ 15,000 00,
$58,752 00-
On a principal at 6 per cent, of.................................................................■ 979,200 00
There was deducted other property, in regard to which no issue is raised 163.000 00
Balance.......................................................................................... $816,200 00

The claim of the relator is that there should be deducted from the last amount, as not subject to taxation, the sum sufficient to produce the fifteen thousand dollars used in redeeming bonds, redeemable each year, viz.: two hundred and fifty thousand dollars, leaving for assessment, balance of five hundred and sixty-six thousand two, hundred dollars.

In other words, the relator claims that the annual payment of-fifteen thousand dollars on its bonded debt is a running expense of the road, and contends that it should be deducted in determining, the earning capacity of the road.

The respondents, on the other hand, contend that the mmwnt of-dividends paid by the company to the shareholders, plus the amount, paid on the bonded debt, is the earning capacity of the ro.ad.

An unimportant clerical error was corrected by the District Court;save that correction the relator’s application was rejected.

From the judgment the relator appeals.

The Board of Assessor's is ordered, in assessing the franchise of a corporation, to take its earning capacity as a basis of yaljue.

The word “ earning” in the statutes is a broader term than “ the amount of dividends paid by the company to the stockholder.”

Of course, in determining the proper assessment of a corporation such as plaintiff, the running expenses are to b.e deducted; they, however, do not include an amount to redeem outstanding b, nds. In the matter of assessments these bonds have naught to do with the value of the property. If they had, a corpp,ration buying a franchise for cash would be at greater disadvantage than a.corporation buying for cash and afterward issuing bonds for- the amo.u.nt of borrowed money paid for the franchise. An indebted corporation for such bonds would always be in a better situation as. to assessment; although generally under the assessing sta,tfites, debts are not deducted in determining the assessment. The franchise is as valuable to a corporation owing bonds as it would be to one not indebted on bonds.

Moreover, this indebtedness at first was not an annual indebtedness. The plaintiff was the adjudicatee of the franchise for an amount in cash.

To meet the requirement of the adjudication an indebtedness was incurred the year that it became the adjudicatee; it is no part of the running expenses of years subsequent.

In the cases heretofore decided by this court, to which our attention is directed by plaintiffs’ counsel, the assessment was measured by the amount of dividends paid to the shareholders. There was no question of other amounts earned applied to the payment of bonds securing the indebtedness of a previous year. That question did not arise in the argument at the bar or in the discussions of the court. “ Net earnings ” are defined substantially, in Union Pacific R. R. Co. vs. U. S, 99 Otto. 402, 428, and in U. S. vs Kansas P. R. R., Ib. 455, 460, as the surplus of the transportation earnings above operating expenses.

The phrase has also been defined in a general way as the excess of the gross earnings over the expenditures in producing them, less the expenditure of capital laid out in constructing and equipping the road.

Under each definition each year stands by itself. We do not think that they cover, as an amount to be deducted from the gross receipts, an indebtedness of a prior year.

The company is not, as contended, paying taxes upon a debt it owes, as urged by counsel for relator, but upon the value of a franchise, as shown by dividends and payment on its bonded indebtedness. They are its earning capacities, non affected by present loans to capital account of many years prior.

Under the terms of the statute we think the judgment should be affirmed.

It is affirmed.

On Application eor Rehea ing.

Breaux, J.

After having reconsidered the points involved in this case, and after having carefully read the elaborate brief of energetic counsel, we are still of the opinion that the bonded indebtedness of the company, which represents the purchase price of their franchise and dates a number of years ago, is not, as to the annual payment of interest on this debt, a part of the annual necessary expenses of the business.

The earning capacity of a company is not such an amount as remains after payment of the whole debt of the company or a part.

It is the excess of receipts over expenses.

To illustrate: Upon property largely encumbered large annual profits may be made, and for this reason it must have considerable value.

The value is not, or should not be, affected by prior indebtedness incurred.

It may be a hardship upon this and other similar companies to make the earning capacity the basis of value of the property assessed, instead of taking the market value of the stock. A consideration of that view is not withiD our jurisdiction. The remedy is within the legislative, and not the judicial control.

As relates to the value of the stock, the facts do not place that •question before us for decision.

The case was tried with reference to the earning capacity of the .road as establishing value.

Payments of the debts of the shareholders does not affect the value.

Under the statute the limited life of the franchise, if it does not affect the value of the property, is not good ground to reduce the assessment. Rehearing refused.  