
    State of Ohio ex rel., etc., v. Halliday.
    
      Taxation of personal property — Protected by patent — Not put on market — But leased or rented — Value determined, how — Duty of county auditor — Valuation of telephone tnstruments.
    
    1. Where a letter of instruction sent by the auditor of state to a county auditor embraces and commands the performance of a number of acts, some of which are proper and others not, the latter officer is bound to follow the former but may disregard the latter.
    2. Where the manufacture of an article of tangible personal property is protected by a patent, and such article when manufactured is not put on the market for sale but its ownership retained by the manufacturer in himself, and the article leased or rented by him to another for a valuable consideration, payable to him, it should •be taxed as his property at “its true value in money,” although that value is enhanced by reason of the patent. Its true value in money for taxation is the value that attaches to it in his hands.
    3. In ascertaining the true value in money of such property in the hands of its owner, every fact or circumstance, brought to the attention of the person or officer who is charged with the duty of fixing that value, and which in its nature bears on the question, should be considered by him. One of those circumstances is the earnings or rental of such article.
    (Decided December 19, 1899.)
    Mandamus.
    This action was brought by the Attorney General on behalf and in the name of the relator as Auditor of State to compel the Auditor of Franklin county in fixing the value of hand telephones and transmitters for taxation, to consider the uses to which such instruments were applied and their earnings or rental value thereof accruing to the owners from such use. The petition, after setting forth the official character of the relator and his powers and duties in relation to taxation, states that these hand telephones and transmitters are owned by the American Bell Telephone Co., a foreign corporation and had hitherto been valued for taxation at $1.62 for hand telephones, and $1.80 for transmitters, or $3.42 for the two, which sum was supposed to equal the cost of manufacturing them together with a profit of twenty per cent added. The petition then as far as need be stated for present purposes, proceeds as follows :
    The said plaintiff further instructed the defendant the true way to compute the value of said property for the purposes of taxation; he was not to assess them at their physical value fixed by the company at $3.42 per instrument, but to ascertain their earning value, which, as plaintiff was informed and believed, and so instructed said defendant was an annual earning or rental value of $14.00 per instrument, paid to said American Bell Telephone Company for the use of such instruments in said county of Franklin, by the lessees of said telephones, to-wit: The Central Union Telephone Company; that if such rental value is not the exact amount, to ascertain the earning capacity of the same, and to take that into consideration in fixing the value of said personal property.
    That if there was an enhanced value by reason of the.use to which such instrument was put in said taxing district, which could be determined from its income, he should so compute it; that the $14.00 per year was over and above freight charges, repairs and supplies paid therefor by the lessee company, and that the same was equivalent to 6 per cent interest upon a capital of $233 for each of said instruments.
    Said plaintiff further instructed the defendant, after ascertaining the amount of capital that it would represent from its earning capacity, to deduct one-third, or so much thereof as to place said telephone property upon the same basis as other taxable values in each of said taxing districts. And to determine what would be the usual selling price' of said instrument at the time of listing, if the same were upon the market bringing in such an income, valuing each instrument at the place where the same was then and there. And if there be no usual selling price known to him or to the assessor, then to fix such price as it is believed could be obtained therefor in money, at such time and place, taking into consideration what said property was then and there used for, in compliance with Section 2739.
    He further instructed said defendant that if he had reason to believe and was informed that said valuations were erroneous, or that the full amount or value had not been returned on each instrument, he should proceed to place the same upon the tax duplicate at its true value, and to charge such corporation on the duplicate with the proper amount of taxes. Whereupon, the defendant, claiming that he was advised by learned counsel in the law that he had no power as such auditor and as such taxing officer to take into consideration the purpose for which said instruments were used, or to take into consideration their income in fixing their values, or to consider their earning capacity as an element of value for the purpose of taxing said instruments, in any way whatsoever ; that he believed the boards, the vitriol bottle, and the rubber transmitter and electric bells and attaehments for said instruments, independent of their use, were worth for taxation the sums so returned, and he had no authority to take into consideration an enhanced value by reason of the use thereof. He then and there refused and still refuses to correct such tax duplicate in the county of Franklin, or to add any value whatsoever further than the physical, tangible values of such instruments, independent of their use. He refused and refuses to compute or consider the values based upon their said use, and refused to obey said instructions given by plaintiff to adopt said system pf estimating and determining the values of property, or any other system of computation for ascertaing the true value thereof in money, save and except that of a tangible value independent óf its use or earning capacity.
    Wherefore, your petitioner prays that a writ of mandamus may issue against said defendant, William H. Halliday, auditor of Franklin county, commanding him forthwith to obey the instructions of the Auditor of State, to ascertain as near as practicable the true amount and value of each of said instruments in each of the said taxing districts where the same are situated in the county of Franklin, and to take into consideration the earning capacity and the purposes for which said instruments and attachments are then and there used, and for the five years previous thereto, and to the amount so ascertained as omitted,, for each year, to add 50 per cent and multiply the amount so omitted as increased by said penalty, by the rate of taxation belonging to said year or years, and accordingly enter the same on the tax lists in his office, and duly give his certificate therefor to the county treasurer; and to assess and tax the property of the said American Bell Telephone Company, after so taking into consideration its earning capacity, its rights and franchises, that give value to said instruments, on the same basis as other real and personal property in each of said taxing districts.
    And to do all other things enjoined upon him in respect to the levying and collection of taxes on the true value of said property so computed, as is required by statute.
    To this petition an answer was interposed by the defendant in which he admitted he had been instructed by the Auditor of State, the relator, as averred in the petition, and that he had declined to follow such instructions and sought to justify his action in this respect by setting forth among other facts, the following :
    This defendant further says that Section 2739 of the Revised Statutes of Ohio provides that, “In listing personal property it shall be valued at the usual selling price thereof at the time of listing, and at the place where the same may be, and if there be no usual selling price known to the person whose duty it is to fix a value thereon then at such price as it is believed could be obtained therefor, in money, at such time and place.”
    The defendant is informed by the attorney for the American Bell Telephone Company and upon such information avers the fact to be that said telephone company at the time of making said returns could and did manufacture said hand telephones and transmitters at not to exceed the fellowing cost: Hand telephones, $1.62; transmitters, $1.80; which is the valuation put upon said instruments for taxation by said returns made to this defendant. That said price of manufacture, which includes a profit of twenty per cent, to the manufacturing agent, is the reasonable cost thereof. And this defendant further avers, upon like information and belief, that although said telephone company did not manufacture said hand telephones and transmitters for the purpose of selling the same, yet hand telephones practically and substantially if not identically the same were bought and sold in said county and state during said time for less, than the valuation at which said telephone company returned such property belonging to it for taxation, and less than the valuation put thereon for purposes of taxation; and this defendant upon like information and belief avers the fact to be that the usual selling price in said county for hand telephones substantially similar to those belonging to said telephone company and used for substantially similar purposes, was during the year 1897, and prior thereto and now, less in amount than said valuation of said hand telephones so made from year to year for taxation belonging to said telephone company in said county.
    This defndant further says that he is informed and believes, and upon like information and belief denies that said telephone company receives an annual rental or income of $14.00 per instrument, and avers that the total annual sum paid by the Central Union Telephone Company to the American Bell Telephone Company measured by the total number of hand telephones and transmitters in use in the territory in which said Central Union Telephone Company does business, does not exceed $2.00 for each set, consisting of a hand telephone and transmitter; and that in said Franklin county, by reason of the fact that the rates there paid by subscribers are higher thán the average rates charged by said Central Union Telephone Company, the annual sum paid by the Central Union Telephone Company during the year 1897 did not exceed the sum of $4.23 per set.
    And this defendant, upon like information and belief avers the fact to be, that said the American Bell Telephone Company is the owner of many and divers patents issued by the United States of America, covering and relating to the aforesaid transmitters, and also many other parts and appliances useful in the operation of telephone exchanges and carrying on of the telephone business, and that said telephone company has licensed and permitted the Central Union Telephone Company to the exclusion of all others to use in carrying on the telephone business of said Central Union Telephone Company in said Franklin county and elsewhere the aforesaid transmitters, and also the aforesaid divers and sundry parts and appliances protected and covered by said patents as aforesaid, and also the right to use any additional patents or improvements acquired by said the American Bell Telephone Company and has bound itself by contract not to permit any other person or corporation to use the same in said territory; and that the said annual amount paid by said Central Union Telephone Company to said the American Bell Telephone Company is substantially all paid as royalty or compensation for the right to use the transmitter, hand telephone and patented devices and appliances in the territory aforesaid, and for the agreement aforesaid not to permit such use by any other person or corporation and for the right to secure the use of new and additional patents as aforesaid; and that the title to the instruments was and is kept in the American Bell Telephone Company solely from considerations of convenience and for the better securing of protection of the patent rights of the American Bell Telephone Company.
    And this defendant further says, that he is informed and believes and upon such information and belief avers the fact to be that the American Bell Telephone Company owns no part of the telephone outfit except the hand telephone and transmitter, and that the boards, vitriol bottles, electrical bells and all attachments for the appliance or combination of parts and instruments commonly described as a telephone instrument, do not belong to the American Bell Telephone Company, but are owned by the Central Union Telephone Company, and he has no right to impose taxes against the same on the tax duplicate against the American Bell Telephone Company; and he avers that the usual life of said hand telephones and transmitters does not exceed about four years.
    Further answering, this defendant admits that he has refused to adopt the system of estimating and determining the value of the aforesaid property belonging to the American Bell Telephone Company set forth in the instruction of the plaintiff herein; that is to say, the system of valuing the personal property of the American Bell Telephone Company at the principal sum which would produce at the rate of six per cent, per annum an income or revenue equivalent to the amount paid by the Central Union Telephone Company to the American Bell Telephone Company as aforesaid, and says that he has done so for the foregoing and the following reasons: It is provided in Section 2 of Article 12, of the Constitution of the state of Ohio, that “laws shall be passed taxing by a uniform rule all real and personal property according to its true value in money;” that to follow the instructions of plaintiff would be to tax the personal property of said Telephone Company by a different rule from that applied to the property of all other persons and corporations and not at its true value in money; and that it is further provided in Section 2739 of the Revised Statutes of the state of Ohio, that the usual selling price actually ascertained or estimated in compliance with said Section 2739 should be the standard and method of ascertaining the true value in money of personal property subject to taxation; which requirement of the statute would be violated by obeying the instructions of plaintiff. And this defendant says that to adopt the system of taxation in accordance with the instructions of the plaintiff would be to place a tax upon the intangible property of a nonresident of this state. And this defendant further says that it is provided in Section 1 of the Fourteenth Amendment to the Constitution of the United States that no state shall deprive any person of property without due process of law nor deny to any person within its jurisdiction the equal protection of the laws, and the instructions of plaintiff are in conflict with said Fourteenth Amendment. This defendant says that to comply with said instructions of plaintiff would be to levy a tax upon a franchise and privilege granted by the United States to said the American Bell Telephone Company, to-wit: upon patents granted by said United States to said company, which is forbidden by the Constitution and laws of the United States. And this defendant says that if the hand telephones and transmitters belonging to the American Bell Telephone Company in said Franklin county, Ohio, should be valued for taxation upon the basis and in the method required by plaintiff, and which plaintiff by his petition herein asks this honorable court to direct defendant to adopt such valuation and such basis or method of arriving at valuations for taxation would be in conflict with and contravention of the Constitution and laws of the state of Ohio and the Constitution and laws of the United States of America. And this defendant denies that it is his duty to comply with any instructions given by the plaintiff under Section 166 of the Revised Statutes of Ohio aforesaid, when such instructions or the construction by the plaintiff of any statute of Ohio conflicts with the true meaning and intent of the Constitution and laws of Ohio, or of the Constitution and laws of the United States.
    Wherefore, this defendant prays that he may be hence dismissed with his costs in this behalf most wrongfully sustained.
    Chas W. Voorhees, Attorney for Defendant.
    
    A reply was filed which, so far as material, admitted that the American Bell Telephone Company is the owner of many and divers patents issued by the United States of America, covering and relating to transmitters, and also to many other parts and appliances, useful in the operation of telephone exchanges and carrying on of the telphone business.
    With the exception of what is herein expressly admitted, the plaintiff denies each and every allegation of the answer of the defendant.
    
      F. S. Monnett, Attorney General and E. B. Kinhead, for plaintiff.
    It is the tangible telephonic instruments, separate and distinct from the incorporeal patent right, which the relator is seeking to have taxed, at a price which the taxing officers believe could be obtained therefor, there being no selling price. The state is not seeking to tax the patent right, or to have a tax assessed that would in anywise hamper, infringe or interfere with the patent right.
    In determining the value the state only desires that the usual tests be applied, viz., the uses to which the property is put.
    It is not a difficult matter to determine (nor is it disputed) that this property falls within the division of personal property which is to be valued for purposes of taxation at its usual selling price under Section 2739 of the Revised Statutes.
    The relator is not seeking to have the patent right of the defendant taxed, but is only seeking to have the personal property taxed in the usual manner by assessing the value thereof in strict accord with the statute. The defendant in his answer endeavors to claim that the plaintiff is seeking to impose a tax on an intangible right, viz.: a patent granted by the United States.
    A buggy, book case or any kind of personal property may have been patented, so that no one but the owner of the patent has the right to manufacture or sell it, but that does not affect or change its quality as personal property, and such property should be taxed according to its selling price, which can only be determined by the uses to which it is put.
    Where an article is patented it has two properties; if it is personal property the tangible article is classed separately and alone as personal property; the patent right is a class of property by itself.
    A patent right is property. This was so held in Pennsylvania under a statute authorizing persons to make- contributions to the capital stock of a limited partnership of real and personal estate. For this purpose the court held patents personal property, and that in determining the value of distinct patents which are useful only in combinations, or only as they are united in the completion and operation of a single devise embodying the principle of three, they may, for the purposes of valuation, be considered and valued together. Rehfus v. Moore, 134 Pa. St., 462; Commonwealth v. W. Elect. Light Co., 151 Pa. St., 265; People ex rel. v. Ed. Elec. Light Co., 51 N. E., 269; 
      In re. Sheffield, 64 Fed., 833.
    We must keep in mind the distinction which we have pointed out elsewhere between the patent right and the tangible property, which is the fruit of the right secured by letters patent. This matter is very clearly discussed by the supreme court of Pennsylvania in Commonwealth v. Central D. & P. Tel. Co., 145 Pa. St., 121.
    There is no doubt upon the general proposition that the state cannot tax the franchise or patent right granted by the United States. People v. Edison Electric Light Company, 46 N. Y. S., 338; People v. Harkness, 44 N. Y. S., 51.
    And it has been held in Pennsylvania that a tax cannot be imposed upon capital stock of a corporation invested in either an assignment or a grant of a patent right. Commonwealth v. Air Brake Co., 151 Pa. St., 276.
    Our claim is, that the fact that there are letters patent for the personal property in controversy does not prevent the state from taxing the tangible property at a value determined as is the case with all property, by the use to which it is put. Webber v. Virginia, 103 U. S., 344.
    The right to the exclusive use of a patented article being granted by the United States government, it is not within the province of a state to interfere with the same, by any law which directly affects this right. But as we have already seen, this right being intangible, separate and distinct from patented articles, the state may treat the latter in any way that it may become necessary for state purposes, so long as it does not interfere or encroach upon the rights granted by the government in the patented right. Patterson v. Kentucky, 97. U. S., 501; California v. Pacific R. R. Co., 127 U. S., 1.
    
      As already stated, it is only sought to have the property in this case taxed at a price which it is believed could be obtained therefor, based upon the uses to which.it as a patented article is put, and this we contend in no wise affects the right granted by the United States to make, use, license or sell the patented article. A tax upon the property manufactured under the patented right, the valuation of which is fixed in the manner just stated, leaves the patentee free to manufacture, sell or lease, and is not in conflict with United State authority. Railroad Company v. Penniston, 18 Wall., 5; Thomas v. Pacific R. R. Co., 9 Wall., 579.
    We have taken some pains to discuss the double aspect of the patented property, although it is not disputed that the instruments in question are personal property. But we justify ourselves in making clear this distinction by reason of the attempt in the answer, by the allegation which we quoted in the beginning, to confuse, and to claim that the relator is attempting to tax the patent right. Commonwealth v. Am. Bell Telephone Co., 129 Pa. St., 217.
    The above is exactly what the relator is seeking to do. It is sought to have placed on the taxation list the instruments which the defendant company own, but which they lease to sub-corporation, and for which they receive a royalty and derive as great a benefit were they themselves personally using their instruments. They should not be permitted to escape taxation on the plea that they are not doing business in the state.
    We think the true rule on the limitation of taxation should be that time does not run against the state for the purposes of taxation. Where the accounting officer, as in the case at bar, furnishes his own returns, and has the knowledge within himself of the true valuation which he conceals, he should not be permitted to táke advantage of his own wrong against the state at any time. State ex rel. v. Jones, 51 Ohio St., 492.
    And we might suggest and add, we can discover no satisfactory reason why the same rule should not be applied to the telephone box owned and operated by a foreign corporation that is applied to a block owned by a citizen in this city. No taxing officer would for a moment permit , them to count the number of brick, the pounds of mortar and the panes of glass, and refuse to take into consideration the good will, the earning capacity and the uses to which such building was put. 166 U. S., 220. People ex rel. v. Kalbflisch, 49 N. Y. S., 546 (Supreme Court, 1898).
    Eliminating, therefore, all consideration of the market value of the property in question, we find that there remain two other methods of ascertaining its true and full value, and these are the ones which, as we understand it, were adopted by the learned referee. They are: First, its earning capacity as an investment; and, second, the probable and natural cost of its reproduction. We are inclined to think that the net income of a building constructed for commercial purposes, and as an investment, is an important element in determining its assessable value; People v. Bond, 13 Abl. N. C., 1; C., C., C. & St. L. Ry. Co. v. Backus, 154 U. S., 439; Wells, Fargo Express v. Crawford County, 63 Ark., 576; Pitts, etc., Ry. Co. v. Bacus, 154 U. S., 444.
    The same principle applies to personal property as well as to real estate. Both are equally under the protection of the law of the place where they are located, and both should contribute to the public expense. It follows that while, for some purposes, by a legal fiction, the residence of the owner of personal property determines its situs, its actual location authorizes its taxation without regard to the owner’s residence. Nashua Bank v. Nashua, 46 N. H., 389.
    The state may impose taxes on tangible personal property within the state, irrespective of the residence or allegiance of the owner. Cooley, Taxation, 56, 373.
    Goods and chattels within a state are equally taxable whether owned by a citizen of the state, or a citizen of another state, even though the latter be taxed in his own state for the value of the same goods as part of his general personal estate. Coe v. Errol, 116 U. S., 517; Desty on Taxation, p. 322.
    
      Albert Lee Thurman, Prosecuting Attorney; Gilbert H. Stewart and Williams, Holt & Wheeler, for defendant.
    This is a proceeding under Section 166, R. S. The learned Attorney General seems to contend “finally, in conclusion,” that the instructions of the State Auditor are absolutely binding upon the County Auditor, right or wrong; but probably no one would deliberately defend that view.
    When we remembr that this is a controversy between the State Auditor and the County Auditor, it becomes interesting to inquire what right the State Auditor has to substitute his discretion on a question of fact for the discretion of the County Auditor? Certainly that process is not covered by Section 166. And in any event the petitioner puts himself out of court by this argument, for it is abundantly settled that official discretion will never be controlled by mandamus. State v. R. R. Co., 35 Ohio St., 154; State v. Moore, 42 Ohio St., 103; State v. Crites, 48 Ohio St., 142.
    If the argument intends to assert the discretion of either the County or the State Auditor to construe or administer a valid statute in such a way as to work out an unlawful result, the proposition is readily met by such cases as Reagan v. Trust Co., 154 U. S., 390; Ry. & Tel. Cos. v. Board of Equalizers, 85 F. R., 302; Yick Wo v. Hopkins, 118 U. S., 356.
    The truth is that the element of discretion does not enter into the case before the court. If the State. Auditor has any standing to control by mandamus the action of the County Auditor, it can only be because the latter refuses to do what the State Auditor properly and lawfully instructs him to do. The question, therefore, is not upon the disobedience of the County Auditor or the discretion of his superior officer, but upon the correctness of the instructions formulated by the Attorney General in his opinion, and adopted by the State Auditor on the strength of that opinion.
    We said at the outset that this case relates to the valuation and taxation of tangible personal property, and this, at least in words, is the contention of the state. It is clear that it can relate to nothing else. The legislature has defined what property is subject to taxation in Ohio. R. S., Sec. 2731. Ex parte Schollenberger, 96 U. S., 369; Shaw v. Quincy Mining Co., 145 U. S., 444.
    They reside at home, but do business abroad. Railroad Co. v. Koontz, 104 U. S., 5, 11.
    But that question does not arise in this case, because the American Bell Company does not transact business in Ohio.
    These contracts have been considered by several courts of the highest authority, and it has . been held in every case that the American Bell Company, by operating under them, was not doing business in the respective states. The relation between the American Bell and the local company is that of lessor or licensor, and lessee or licensee, and not that of principal and agent. People v. A. B. T. Co., 117 N. Y., 241; Com. v. A. B. T. Co., 129 Pa. St., 217. And in Ohio, U. S. v. A. B. T. Co., 29 Fed. Rep., 17. See also, Com. v. A. B. T. Co. (Com. Pleas, Pa.), 1 Dauph. Co. Rep., 168; 5 Gen. Dig., 1, 754 (140); Com. v. Standard Oil Co., 101 Pa. St., 119.
    The only category of personal property under which these hand telephones and transmitters could possibly fall is the first, which is expressly limited by the word “tangible.” The definitions of “money” and “credits” which are found later in Section 2730, of course, apply only to property “of persons residing in this state.”
    Any construction or application of the law which would result in taxing the intangible property of a non-resident is contrary to the statute itself, and is condemned by repeated decisions of this court. Grant v. Jones, 39 Ohio St., 506; Myers v. Seeberger, 45 Ohio St., 232; Worthington v. Sebastian, 25 Ohio St., 8; Brown v. Noble, 42 Ohio St., 405; Sommers v. Boyd, 48 Ohio St., 648.
    The rules for valuing this tangible personal property must be found expressed in the constitution and laws of Ohio. The power to tax and to direct the mode of assessment and collection are legislative, and can be exercised only within constitutional limitations which, however, are not to be implied. 25 A. & E. Ency. of Law, 18, 22; State v. So. Penn. Oil Co., 42 W. Va., 80; United States v. Wigglesworth, 2 Story, 373; Mayor, etc., v. Hartridge, 8 Ga., 23.
    In the administration of laws for the collection of the public revenue, it is in the first instance necessary that we ascertain the legislative intent in their several provisions and, next, that we give effect to that intent in applying it to the subject matter with which we have to deal. Beyond the words employed, if the meaning is plain and intelligible, neither officer nor court is to go in search of the legislative intent. Cooley on Taxation (2nd Ed.), 263-4.
    No tax can be levied except by express authority of law. Zanesville v. Richards, 5 Ohio St., 589; Bank v. Hines, 3 Ohio St., 1.
    While the foregoing case has been held in subsequent cases not to be a complete statement of the power of the legislature in regard to levying taxes, it has been approved as applicable in all cases relating, like this case, to the taxation of property. State ex rel. v. Ferris, 53 Ohio St., 314.
    The rule which the legislature has made for valuing tangible personal property is the same for corporations as for individuals (see Section 4, Article XIII) and is laid down in R. S., Section 2739.
    This is the first place a declaration that selling price, or selling value where there is no selling price, shall measure the “true value in money” (Const. Art. XII, Sec. 21, or “the actual value in money” (R. S., Sec. 2744), which means the same thing. Burr on Taxation, Sec. 99; Cummings v. Bank, 101 U. S., 153.
    The evidence brought out by the Attorney General makes it very probable, too, that these instruments if offered- for sale might not find purchasers at any price, because they are useless except in connection with a large and expensive plant like that of the Central Union. A transmitter to be used as a watch charm or a mantel ornament would have a dubious money value in any market. People ex rel. v. Dolan, 126 N. Y., 166.
    It is probably superfluous to dwell upon the necessity of uniformity in matters of taxation. Field v. Comm’rs., 36 Ohio St., 476.
    
      Uniformity requires that the taxes shall reach and bear with a like burden upon all the subjects selected for taxation within the jurisdiction of the taxing power. And where the requirement is in the constitution, a statute levying taxes on any other basis than that of the value of the property taxed, is void. 35 A. & E. Ency. of Law, 57, 65; Bureau County v. Railroad Co., 44 Ill., 229; Railroad Co. v. Boone County, id., 240; Kelly v. Rhoads (Wyoming), 51 Pac., 593; 39 L. R. A., 594.
    That the income of property in general is no criterion for the assessor in making his valuation; see State v. Collector, etc., 4 Zab., 108; State v. Randolph, 25 N. J. L., 427; State v. Metz, 31 N. J .L., 378.
    If income were to guide, the assessing officer must wholly disregard the rules for valuing personal property laid down by the statute, and the goods of a successful merchant, manufacturer or farmer must be appraised at a higher value than the same goods in the hands of one who is unsuccessful. This will not do under any system where taxes are laid according to value. Wilcox v. Coms., 103 Mass., 545.
    Aside from all other difficulties a valuation on the basis of income must be upon net and not gross income. Such a rule would involve an examination of the business of the American Bell Company to determine the proper percentage of deduction for expenses, and a great many other things not covered by the law as it stands. The Nichols law decisions do not apply.
    The voluminous citation of cases upholding the valuation of corporate property on the unit value theory, shows much confusion of thought. Those decisions are no more applicable to this case than are the statutes under which they arose, of which statutes the Nichols law of Ohio is a type. All the courts which passed upon and upheld the constitutionality of that law made it very clear that the rule of valuation is not only different from that laid down in Section 2744, which prescribes the rule for returning the personal property of ordinary corporations, but was intended to and does provide a higher rate of valuation. Express Co. v. Ohio, 166 U. S., 221; Express Co. v. State, 55 Ohio St., 80.
    This rule, as we have shown, applies also to tax statutes, which are not to be extended beyond what is expressed. The authorities are clear that no statute is to be extended in its terms or operation by any equitable considerations. Sutherland on Stat. Const., Sec. 413, 414 and 415.
    Whether an excise or franchise tax might have been imposed upon the American Bell Company under the circumstances shown in this case, need not be considered. Since the legislature has seen fit to make no special provision on the subject, the company remains under Section 2744, and is subject only to an ad valorem tax upon its property in Ohio. We are not here discussing the power of the legislature, but the construction of a statute, which is a very different thing.
    Executive or ministerial officers can enforce tax laws but they cannot exercise the taxing power, or add to or vary a tax lawfully levied. 25 A. & E. Ency., 73; Cooley on Tax., 279.
    This right to the exclusive right and enjoyment granted by the patent laws, neither inheres in nor is attached to the tangible property, nor constitutes its value. Bloomer v. McQuewan, 14 How., 539.
    The most enterprising assessor would hardly capitalize the rental of a furnished house, or a well-stocked farm, or a mill filled with costly machinery and having a valuable good-will, for the purpose of fixing the taxable value of the real estate, yet the error involved in such a proceeding would generally be small compared with that in the method of valuation supported by the Attorney General in this case.
    The most important cases on this subject, as we have said, are cited by the Attorney General in his brief. We add the following: Com. v. Philadelphia Co., 157 Pa. St., 527; People v. Assessors, 46 N. Y., Supp., 388; Com. v. Davis-Colby Ore Roaster Co. (C. P. Pa.), 5 Gen. Dig., 1748; 1 Dauph. Co. R., 118; People v. Telephone Co., 44 N. Y., Supp., 46.
    It has seemed to us that this was not a question for this court at present to decide. By the terms of the statute, the auditor is required first to act, and his action may be reviewed and his conclusion set aside by the court, if wrong. But since the question is made in the case, and there is testimony in the record which would be of controlling force before the auditor, and because the case of State v. Crites, 48 Ohio St., 142, seems to. hold that mandamus may issue under some circumstances, we have thought it best at this time to show why the plaintiff, even if sustained in his other contentions, ought not to be permitted to go back five years and increase the valuations upon the American Bell Company’s property.
    What is meant by a false return under Statute 2781, has been determined by this court and others, and it is uniformly held that there can be no false return within the meaning of the statute unless there is a design to mislead or deceive on the part of the tax-payer, or at least culpable negligence. Ratterman, Treas., v. Ingalls, 48 Ohio St., 468; Insurance Co. v. Cappellar, 38 Ohio St., 560; Probasco, Executor, v. Raine, 50 Ohio St., 378; Adams v. Shields, Treas., 17 O. C. C. R., 129.
    
      The doctrine of these cases has been reaffirmed by this court within a few weeks in Ins. Co. v. Hard, Treas., 59 Ohio St., 248.
   Bradbury, C. J.

After issue had been joined between the parties evidence was taken bearing on the matters in dispute. Both the pleadings and the evidence, we think, took a wider range than was necessary, and embraced inquiries into matters not within the province of the court, at least in this action. The pleadings and evidence seem to indicate that this court would or might fix a value for taxation on the hand telephones and transmitters which are the subjects of dispute. This notion, if it was in fact entertained by the parties, is erroneous for it is not for this or any other of the courts of the state in the first instance to place values for the purpose of taxation on any property whatever. The subjects of the dispute, the hand telephones and the transmitters, were the property of the American Bell Telephone Co., a foreign corporation, and under Section 2744, Revised Statutes, the duty of fixing its value for taxation and making return thereof to the County Auditor devolved on its officers and agents, subject, of course, to the control and revision of the former. If any mistakes or errors occur in these returns either on the part of the persons making them or of a County Auditor, whether such mistakes and errors consist in omitting to return all property lawfully taxable, or in the values placed on that returned, or both, there is provided by law an appropriate remedy for the same; but the present action being in mandamus is not adapted to that end. State v. Crites, 48 Ohio St., 460. If, however, the laws of the state invest the Auditor of State with authority to instruct county auditors in certain respects and require obedience on the part of County Auditors to such instructions when given, then it is quite clear this obedience is a duty enjoined by law and may be enforced by mandamus. It falls strictly within the definition of mandamus contained in Section 6741, Revised Statutes. This authority of the Auditor of State rests on Section 166, Revised Statutes, which reads as follows: “Section 166: He shall, from time to time, prepare and transmit to the auditors of the several counties in the state such forms of returns to be made by them-to his office, and such instructions upon any subject affecting the state finances, or the construction of any statute, the execution oí which devolves in part upon county auditors, and which affects the interests of the state, as he deems conducive to the best interests of the state; and county auditors and local officers acting under such laws, shall observe and use such forms and obey such instructions.” This section clearly and explicitly confers on the Auditor of State power to instruct county auditors in all matters affecting the state’s finances, and with equal cleanness enjoins obedience on the latter officers to such instructions.

The instructions given by the Auditor of State to the County Auditor as set forth in the petition relate to the value that should be placed on certain property listed for taxation, and that is unmistakably a matter affecting the “state’s finances,” for the chief source of the revenue of the state is taxes levied on property. The instructions in question, therefore, fall within the power conferred by Section 166, Revised Statutes, on the State Auditor. While this section imposes on county auditors the duty of obedience to the instructions of the state auditor, it should be understood to embrace only lawful instructions. They would upon the plainest principles of reason be exempt from obeying an unlawful instruction, and certainly no court by mandamus would compel obedience to an instruction unwarranted by law.

Where, however, the letter of instruction sent by the Auditor of State embraced several different though connected commandments, some of which were lawful and some unlawful, the county auditor should not be excused from obeying those that are lawful because of the joinder with them of the unlawful ones.

The petition discloses that the Auditor of State was of opinion that the telephonic instruments involved, in this inquiry and known as hand telephones and transmitters had no “usual selling price,” that is, were not manufactured and put upon the market for sale at all, and for that reason their capacity to earn money, or their rental value, should be considered in estimating for taxation their actual value in money. He also states that he is informed what that rental value or earning capacity is and places it at $14.00 per year, and insists that as $14.00 is equal to six per cent, per annum on $233, the value of the instrument should be deemed equal to that sum. But as he seems to concede that property in general is taxed only at two-thirds of its value, the same favor, in his opinion, should be extended to the telephone company, and these instruments valued only at two-thirds of $233 (their alleged rental value) or $155.33. It appears, therefore, as we construe the petition, that the Auditor of State not only commands the County Auditor in placing a value on the instruments in question for taxation, to consider their earnings or rental, but also instructs him to make that the sole test of that value. The answer interposed by the County Auditor advances a great many matters that we have not deemed necessary to refer to specifically; but construing the answer all together, we find that it admits that the transmitters have -no “usual selling price,” but avers that tbe hand telephones are manufactured and sold in the market, and therefore, have a “usual selling price.” The answer according to our construction also shows that the County Auditor in fixing a value on these instruments considered only the cost of manufacture. The answer also denies that the earning capacity of these instruments is $14.00 per year, and avers that while that may be the sum annually received by the owners of the instruments, other valuable considerations besides their use entered into the contract by the terms of which that sum was payable. The pleadings as thus construed raise the questions that we care to discuss.

The evidence taken by the parties to maintain their respective contentions took as wide a range as the pleadings themselves, and as already indicated, went into details much further than was necessary according to the view of the case adopted by this court. Among other things it appears from the pleadings and evidence that the “hand telephones” mentioned is the hard rubber trumpet-shaped cylinder which is placed to the ear in receiving a telephonic message, and called a “receiver,” while the “transmitter” is the mouthpiece, into which the words are spoken, with the diaphragm, etc., immediately connected with it. The instruments are protected by a patent issued under the authority of the United States, which is owned by the American Bell Telephone Company, a corporation created under the laws of Massachusetts, which manufactures and owns them, and by which they are rented or leased to the Central Union Telephone Company to be used in this state in connection with the wites, etc., of the latter, for telephonic purposes. After they have been manufactured they are simply tangible articles of personal property, and being sent into this state by their owner for their own profit they become a part of the general mass of that species of property found herein, and being within the jurisdiction of this state should be valued and taxed in the same manner that other property of its class, i. e., as tangible personal property, is valued and taxed by our laws. The constitution of 1851, Section 2 of Article 12, requires all property to be taxed “according to its true value in money.” No reason is apparent Avhy this constitutional rule without the aid of a legislative declaration on the subject would not have been a laAvful guide to assessing officers and owners of property in valuing the same for taxation whenever the machinery for taxation should be created and put into operation by laAv. However this may be, the general assembly at an early day after the adoption of the constitution prescribed rules for valuing personal property for taxation, which are embodied in Section 2739, Revised Statutes, as follows: “In listing personal property, it shall be valued at the usual selling price thereof, at the time of listing, and at the place where the same may then be; and if there be no usual selling price known to the person whose duty it is to fix a value thereon, then at such price as it is believed could be obtained therefor, in money, at such time and place.” The rule of the “usual selling price” unquestionably applies to, the great bulk of the tangible property of the state and is of easy application, and doubtless would have been used where applicable had the legislature kept silent for its intrinsic merits would commend it to all men charged with fixing the values of property for any purpose whatever, Where this rule cannot be applied the legislature has declared that the value for taxation should be what “it is believed could be obtained therefor in money.” This is not the formula adopted by the framers of the constitution to express the constitutional rule, and if there is any difference between the respective meanings of the two sets of words the legislative phraseology must yield to that of the constitution. Exchange Bank v. Hines, 3 Ohio St., 15, 22. The framers of the constitution did not contemplate nor intend that an owner of valuable and productive tangible personal property should be able to relieve himself from taxation on account of it by hedging it around with circumstances or conditions that would make it valueless to all the rest of mankind, though highly productive in his hands. Property is taxed in the hands of its owner for the support of the government which protects and secures him in its enjoyment and to construe that provision of the constitution which requires it to be taxed according to its true value in money to mean its value in money to him rather than to another, is reasonable. It carries out one manifest purpose of the constitution in this respect which is to prevent exemptions in favor of any species of productive personal property.

The telephonic instruments involved in this case may have no selling value whatever. In fact as respects the transmitter that is conceded by the County Auditor. This lack of a selling value results from a circumstance that it could not be put to any valuable use by a purchaser. It would be a mere curiosity, a piece of bric-a-brac in his hands, unless accompanied with a right to apply it to the uses for which it was created, i. e., that of sending telephonic messages. Therefore, if the selling value of the article, i. e., the value it would possess in the eye of a possible purchaser, is the standard of value for taxation, it should not be assigned any value at all. For in that sense of the phrase it has no value. The respondent, the County Auditor, does not contend that these articles had no value, and therefore should not be taxed at all, but insists that the cost of manufacturing them should be made the standard of value for that purpose. This contention finds no support in the constitution or statutes of the state, and but little if any in the nature of things. In the case of an article just manufactured, sound and unworn, the cost of producing it might be a circumstance of great weight in estimating its value, but in respect of articles more or less worn, or that had been superseded by others better adapted to the same end or where their production had been cheapened or on the other hand become more expensive, it is manifest that the cost of production might be a very imperfect standard of its value. The legislature, it will be observed, has made no attempt to prescribe the means by which the money value of an article for taxation may be ascertained, nor in any way to limit the inquiry. It has left open to the person who is to perform this duty every avenue that leads to information which in its nature bears on the question. The conscientious officer will avail himself of all such information. No fact or circumstance having such bearing will be disregarded by him if called to his attention. That the income-producing capacity of an article is an important factor in determining its value is so obvious as to seem beyond the bounds of controversy. This doctrine was sanctioned in its application to real estate in State v. Jones, Auditor, 51 Ohio St., 513, and in Express Co. v. Ohio, 166 U. S., 220, and no reason is perceived nor has any been assigned why a principle so plain and just should not be applied universally to all species of property. This is the first inquiry that a prudent prospetive purchaser would make. Other considerations would doubtless receive his attention, as the original cost, the length of time it would last, the expense of repairs and the cost of reproduction and the like; none of them would be passed by. Other considerations no doubt would occur to a sagacious, thoughtful man. But without pursuing the question further, we hold that the command of the Auditor of State requiring that the Auditor of Franklin County, the respondent, to consider the earnings or rental of the instrument in question, was lawful and should have been obeyed by the latter in respect to those that have no “usual selling price.”

The fact that an article is the fruit or product of a patent combination or process does not withdraw it from taxation. It is true no one can make or use the article without the consent of the patentee or his assignee, but when.it is made it becomes property, and as such is as completely under the dominion of the state as is an unpatented article. To tax an article protected by a patent is not taxing the process or combination by which it is produced. The proprietor of a patent doubtless has the exclusive right to use the process or combination patented. No one without his consent can do so. In this monopoly or right to keep others from its use resides the chief value of the patent. This right itself is property often of real and immense value before an article is made pursuant to it. And this intangible property the states of the Union cannot tax. People ex rel. Edison Electric Illuminating Co., etc., v. Assessors, 156 N. Y., 417; Robinson exparte, 2 Biss, 309; Commonwealth v. Westinghouse E. Mfg. Co., 151 Pa. St., 265; Commonwealth v. Phila. Co., 157 Pa. St., 527; Commonwealth v. Petty, 96 Ky., 452. The property in this right, however, is quite different from the property in an article made by the patented process or combination. The value of the article itself is the same whether it remains in the hands of the owner of the patent or has been sold by him to another. The state should not be required to pause before taxing an article of tangible personal property found in its borders to ascertain whether it was the fruit of some patented process or combination or not. A mowing machine is taxed at its value in money although that value may consist largely of a patented combination. It would be impossible to ascertain what proportion of the entire value was due to the patented combination, and if it could not be taxed upon its entire value it could not be taxed at all. And this is true of all articles the manufacture of which involves the application of any process or combination covered by a patent; so that if an article cannot be taxed on the value which accrues to it by reason of its being patented, a large and valuable proportion of the property in the state will be withdrawn from taxation altogether.

These views find support in a considerable number of authorities, among which are: Webber v. Virginia, 103 U. S., 344; Commonwealth v. C. D. & P. Telephone Co., 145 Penn. St., 121; Patterson v. Kentucky, 97 U. S., 501, 503.

We now come to the contention on the part of the relator that the County Auditor should in valuing the articles in question give consideration only to their earning capacity, which he placed at $14 per' annum. If it had been conceded by the respondent that $14 was the net yearly earnings of these instruments, or the evidence had established that fact clearly, and it had further appeared that without renewal or repairs those instruments would continue in service at that rental for a great many years, say for a lifetime, their money value would be very great, perhaps approximately that which the relator directed the respondent to place upon them. The evidence, however, does not support this contention. The instruments are leased to the Central Union Telephone Company, an Illinois corporation, that owns the telephone plant in operatin in Franklin county. While the contract between this corporation and the American Bell Telephone Company, the owner and lessor of the instruments, seems to contemplate perpetuity, nevertheless, its continued existence rests on the continuance of conditons in their nature uncertain. The instruments themselves do not bear a long life. But above all these, the annual payment of $14 is not simply a compensation for the use of the instruments. It is also the consideration for other valuable privileges and rights granted or guaranteed to the lessee. It is quite clear that the instructions of the relator in this matter are not only founded on a statute respecting the net income derived from these instruments, but that they also limit the inquiry to this one circumstance, thus making it the sole standard of value, although as we have shown other circumstances may, and in this instance did, exist, that bear materially on the question of that value. The County Auditor, therefore, was not bound to follow the instructions of the relator in this respect. That the earning capacity of these instruments are a material factor in ascertaining their value and should be considered, it would seem, to be too clear for controversy. The difficulty, however, of separating that portion of the yearly payment of $14, which is to be taken as the rental value, from that portion thereof, which is to be taken as compensation for other privileges and rights granted by the contract, is doubtless a serious obstacle to its application to the property involved, but perhaps not unsurmountable. However that may be, the difficulty is not one that falls within the province of this court in this case to overcome. It is a duty which the law devolves' on the respondent. He should have in good faith attempted, pursuant to the instructions of the relator, to ascertain as near as practicable the proportion of the whole sum received by the American Bell Telephone Company from the Central Union Telephone Company that ought to be credited to the use of these instruments; and having done this, he should have considerd these earnings in connection with every other circumstance that came to his knowledge and that bore on the question, and placed on these instruments their true value in money.

The relator seems to have conceived that the valuation placed by the American Bell Telephone Company on these instruments was false within the meaning of Section 2781, Revised Statutes, and that the respondent on that account should ascertain the value of these instruments for the five years preceding the current year the instructions were given, and add the penalties provided by that section. It does not appear, however, in the evidence that the returns made by the American Bell Telephone Company during those years were false within the meaning of that section as construed by this court in Ratterman, Treas., v. Ingalls, 48 Ohio St., 468. Nor does it show that the company failed to return any instrument owned by them in Franklin county, or that they did not act in good faith and with reasonable care in valuing the instruments returned.

Judgment accordingly.

Shauk, J., dissents.  