Daniel Barnard (with whom were T. J. Whipple and Jeremiah Smith), for
the plaintiffs.
W. E. Buck, for the plaintiffs. By the original charter of the plaintiff corporation,
granted in 1831, the purposes of the company were limited to carrying on various
manufacturing operations at what is now known as Lake Village, by means of the water-power
there, which is now owned and controlled by them. The company maintained a corporate
existence for fifteen years under this charter, when, in 1846, the charter was so
amended as to empower them to improve the water-power of the Winnipiseogee, Pemigewasset,
and Merrimack rivers, make contracts with other riparian owners, etc., and since
that time they have operated under the amended charter. After improving the outlet
of Winnipiseogee lake and the power at Lake Village to a sufficient extent to enable
them to control most of the flow of Winnipiseogee river, contracts were made with
the other mill-owners on said river, by which a certain uniform flow must be maintained
in the river at all times; and under these contracts 88 per cent. of the available
supply of water from the lake, in its improved condition, is used for this purpose.
This constitutes in great measure the improvement of the water-power of the Winnipiseogee
river, and incidentally all improvement of the water-power of the Merrimack river,
and is entirely independent of the ownership of this Gilford estate. It matters
not who may own the stock of this plaintiff corporation, or who may own this estate,
these contracts must be fulfilled, and the advantages arising from them, to any
and all riparian owners from Gilford to the Atlantic, are as fixed and determined
as if they came entirely through the operations of nature. The remaining 12 per
cent. of the available supply from the lake is discharged in such quantities and
at such times as will best serve the interests of the stockholders of the plaintiff
corporation, i.e., in such manner as to improve the water power of the Merrimack
river; and this constitutes the direct improvement of the Merrimack river waterpower
by the operations under this charter. In the appraisal of the Gilford estate of
the plaintiffs, the referees have divided it into
two items. The first includes the entire value of the estate for all purposes of
local use and enjoyment, without reference to any other estates. The second item,
$140,000, is based entirely on increased values of the Lowell and Lawrence estates,
and is wholly wrong.
1. It places that amount of tax in Gilford on a portion of the values of estates
in Lowell and Lawrence.
The referees say that in making this estimate of $140,000 on the dam, gates, and
flowage and reservoir rights, they consider that the mills and other estates of
the stockholders of the plaintiff corporation, situated in Lowell and Lawrence,
are increased in value by reason of these reservoir rights being capable of being
controlled for their benefit. The item does not include any part of the value of
the plaintiffs' mills; and as the dam and the easements incident thereto can have
but a very small local valuation, after leaving to the mills the water-power incident
to them, it is evidently based entirely upon the increase of values in the Lowell
and Lawrence estates. It cannot include the water-power of the plaintiffs' mills
since that must be appraised with the mills themselves. Eighty-eight per cent. of
the water-power of this dam is therefore included in the first item. This eighty-eight
per cent. of the water-power must go to Lowell and Lawrence in precisely the same
way it now goes, no matter who owns the Gilford estate. It is incident to the mills
themselves, and can only be appraised with the mills as appurtenant to them.
The only reasonable interpretation of the report therefore is, that the first item
includes all the mills and other estates and eighty-eight per cent. of the water-power,
and shows their full local value and the second item includes the dam, gates, flowage
and reservoir rights, and twelve per cent. of the water-power, and is based entirely
upon increased valuations of the Lowell and Lawrence estates. This amounts to a
transfer of $140,000 of valuation from estates in Lowell and Lawrence to this Gilford
estate for purposes of taxation. In fact, the report would only be changed in language,
and none at all in meaning, by saying the true value of this Gilford estate in itself
is $135,000, but as certain uses to which it is put increase the value of certain
Lowell and Lawrence estates, and these latter estates are owned by the stockholders
of this plaintiff corporation, $140,000 of the value of those estates should be
added to this and taxed in Gilford. To say that estate A is appraised higher because
estate B is increased in actual value by certain uses of estate A, is the same as
saying that a portion of the value of estate B is included in the valuation of estate
A.
Because a certain estate is absolutely necessary to its owner for certain uses and
purposes to which he devotes it, is no reason for aiding to its taxable value; and
if those uses largely enhance the value of other estates, the enhanced values are
in the other estates, and not in the original estate itself. Suppose A to own a
reservoir of water in Gilford worth $10,000, as a mill-site in Gilford, and by
means of that reservoir to supply his mill-plant in Laconia, worth $300,000, with
a uniform water-power. This reservoir supply is absolutely necessary to him, and
the Gilford selectmen appraise his property in that town at $30,000. On petition
for an abatement, the referees find the true value to be $21,000. The owner then
sells the Gilford estate to B for $10,000, its value as a mill-site, under the restriction
that B shall discharge uniformly from the dam a certain quantity of water sufficient
to run A's mills at Laconia, and reserving a right of entry on B's default of
the covenant. A cannot now be taxed in Gilford at all, as he owns no property there;
and B can only be taxed for $10,000 in Gilford, for that is all he owns there: it
is all he gave for it, and all it is worth. It is evident that the referees simply
transferred $11,000 of valuation from Laconia to Gilford. The principle of the present
finding is the same, and by it $140,000 of valuation is transferred from Lowell
and Lawrence to Gilford, to be taxed there; and a greater or less amount of complication
in the details in no way mitigates the error in principle. The conclusion is inevitable,
that the valuation of $140,000 in the second item of this report is a valuation
on Lowell and Lawrence estates, and not on the Gilford estate itself.
2. It is based entirely upon what the referees estimate the estate to be worth to
the present owners.
If the owners of this Gilford estate had no interest in the Lowell and Lawrence
estates whatever, it is evident that this second item of valuation would have no
place in the report. If citizens of Gilford owned the estate, no one would think
of attempting to tax them higher than its local value because Lowell and Lawrence
estates are increased in value by its use. No attempt is made in this case to tax
this property higher on the ground that Manchester, Franklin, Tilton, and Laconia
estates are increased in value by its use, though the fact of such increase is as
evident as any increase at Lowell and Lawrence. The estimate is based upon the common
ownership of the estates, and is an estimate which would not be made if any other
parties owned the property in question. Hence it is an estimate of what the referees
consider the property worth to the present owners.
3. It is found contrary to the express instructions of the statute.
The statute says, — "The selectmen shall appraise all taxable property at
its full and true value in money, as they would appraise the same in payment of
a just debt from a solvent debtor." Suppose the mills, buildings, and other estates
in fee of the plaintiffs to be set off on execution in payment of debt to the amount
of $135,000, and the dam, gates, flowage, and reservoir rights of said plaintiffs
set off in payment of another debt to the amount of $140,000. The mills, of course,
are set off with the water-power incident to them, and hence the first item takes
eighty-eight per cent. of the water-power of the dam; and the second claim has only
the dam and twelve per cent. of the water-power to satisfy it.
Such an estate would have no such value as placed upon it by this report. In fact,
the dam, gates, flowage and reservoir rights, and the twelve per cent. of surplus
power, contingent as it is shown to be upon the variations of natural supply, would
be practically worthless to any owner, hampered as it would be by the claims of
all the mills for the water-power belonging to them.
4. The property and interests considered in fixing the taxable value of real estate
should not be more extensive than the fee of the estate in question will convey.
A deed of the Gilford estate will convey no interests in Lowell and Lawrence, and
cannot pass any increased values of Lowell and Lawrence estates, however much they
may depend on this estate. The valuation includes $140,000 which cannot be sold
and deeded with the estate. It includes that amount of valuation which no purchaser
can find there. The property and interests considered in this valuation are greater,
therefore, than the fee of the estate will convey.
We are familiar in New England with the use of streams for water-power, but in other
sections of the country they have a different but equally valuable use. Suppose
the conditions of climate and soil in the Winnipiseogee valley to be like those
of many portions of our extreme Western states, and that a few men purchase, for
a nominal sum, $6,000 acres of arid lands along the river in Laconia, Tilton, and
Franklin, and form an irrigation company. The company purchase the banks of the
Winnipiseogee river, in Gilford, for a short distance above the Laconia town line,
and erect upon this estate a dam and canal (the entire cost of the company's plant
being $10,000), by means of which they divert the water of the river, and irrigate
their lands in the lower towns, making them very valuable and productive. The natural
conformation is such that this estate in Gilford is absolutely necessary for the
accomplishment of this purpose, but it has no value beyond its cost for any other
use. The irrigation company own the Gilford estate, and its stockholders own the
farms below, which are worth, in their improved condition, $50 per acre, or $300,000.
The value of these farms should be taxed in Laconia, Tilton, and Franklin, and no
part of their value in Gilford; and Gilford would not be entitled to tax on this
dam any part of the value of the farms below. The entire value of the farms may
depend upon the dam, but it is, nevertheless, in the farms themselves, and should
be taxed there. There is no reason for taxing a part of that value on the Gilford
dam that does not apply with equal force to all of it, since all the value is dependent
on the dam. Whatever value the Gilford estate has in itself is a proper subject
for taxation in Gilford. It may be worth $5,000 for a water-power, and if so is
taxable to that extent; but if the selectmen of Gilford be allowed to take into
consideration the increased values of the farms below by the use of this estate,
they have just as much reason to tax in Gilford the entire value of
the farms as they have to tax ten per cent. or any fractional part of it in that
town. If the Gilford estate were a reservoir, and the estates below hydraulic mines
of great value, the same illustration would hold good. Transforming also the farms
of Laconia, Tilton, and Franklin to mill-sites and manufactories, and using the
water for power at these places, brings us to the case under consideration. In both
instances the fee of the Gilford estate does not carry with it the interests which
are considered in its appraisal. It is a question worthy of serious consideration,
whether or not it is ever either necessary or justifiable for the selectmen to take
into consideration any estates, outside the limits of their own town, in the appraisal
of those within the town, except by way of analogy. Farming lands divided by a town
line may present cases where this is necessary to a certain extent, but under all
ordinary circumstances it would be wrong.
5. The courts of Massachusetts have uniformly decided against this finding.
In Pingree v. County Commissioners of Berkshire, 102 Mass. 76 , one Thomas P. Pingree,
as trustee for certain mill-owners in Dalton and Pittsfield, held land, dam, etc.,
in Windsor, which constituted a reservoir for the supply of the Dalton and Pittsfield
mills. Wells, J., says, — "We are satisfied that the land in this case, and
the dam erected upon it, are taxable as real estate in Windsor; that the valuation
should be made, not subject to the use to which they are for the time appropriated,
nor independently of that use in any sense which excludes it from consideration
as a means by which their value is made available, but in the same manner as the
mills and water-wheels are to be valued. Boston Water-Power Co. v. Boston, 9 Met.
199-204. No part of the value of the water-power, as such, is to be included in
the valuation of either; but the capacity of the property for valuable use is not
to be excluded from consideration for the reason that it is so limited in the purpose
or mode of its use as to be of only nominal value independently of its use in a
particular mode or for a particular purpose. The valuation in the present case is
such as to give no ground for the supposition that it included any part of the value
of the water-power, or that it is other than a fair and reasonable estimate of the
land and structure erected upon it. The tax, therefore, is rightly assessed and
the petition is accordingly dismissed."
There is no distinction between taking into consideration the increased values of
other estates below, and including a part of the value of the water-power used with
the mills below, for the increased values can only arise from an increase of water-power,
and the increased values are a part of the value of that water-power.
In City of Fall River v. County Commissioners of Bristol, 125 Mass. 567 , was involved
the question of an assessment against the Watuppa Reservoir Company. The stockholders
of this company were several manufacturing companies in Fall River, owning
water-power upon Fall river, and stock in the Watuppa Reservoir Company in proportion
to the number of feet fall at their respective privileges on Fall river. The Troy
Cotton and Woollen Manufactory owned the land at the outlet of Watuppa ponds, and
the Reservoir Company, by license from them, elected thereon a dam to flow the ponds
two feet higher than they had been previously flowed purchased the necessary flowage
rights, and regulated the water by said dam in the common interest of the stockholders
of the Reservoir Company. The city of Fall River, by their assessors, made an assessment
on the Watuppa Reservoir Company for "reservoir of water used to maintain a uniform
supply of water for mill purposes, with the dam connected therewith, and the land
under the same." On application to the county commissioners the tax was abated,
and the city of Fall River then petitioned the court for a writ of certiorari, which
petition was denied, the court holding that reservoir rights are not taxable real
estate, and the Watuppa Reservoir Company had no taxable real estate in Fall River.
6. By a decision of the Massachusetts courts, and by the amended statement of facts
in this case, it is shown that the full values of the Lowell and Lawrence estates
are taxed in Massachusetts.
The amended statement of facts is clear upon this point, and needs no comment. City
of Lowell v. County Commissioners of Middlesex, 6 Allen 131, was a petition for
a writ of certiorari to quash the proceedings of the county commissioners, in abating
a tax assessed against the proprietors of the locks and canals on Merrimack river,
by the city of Lowell, in the year 1860. The tax was assessed upon the following
description of estate: "Land adjoining and bordering on the canal, with gate-houses,
feeders, and mason work, and all the canals owned by the proprietors of the locks
and canals within the city of Lowell, with the exception of the Pawtucket canal
and its appurtenances, $300,000." It appeared that all the permanent water-power
furnished by the canals, etc., was used by the mills, and was taxed with them in
the form of an additional value which they possessed by virtue of their permanent
water-power. But nine months in the year there was a surplus power capable of profitable
use, and this made the property a proper subject for taxation. The county commissioners
were therefore in error in making an abatement of the entire tax, as they did. Hoar,
J., says, — "But the assessors had not taxed any water-power, eo nomine. They
had taxed land, and structures upon land. If the water-power enjoyed by the several
mills, and increasing their value respectively, which was already taxed as a part
of the value of the mills, had exhausted the whole productive capacity of the land
and structures by which it was created, they should not have been taxed further.
But as the agreed facts show that a valuable water-power for nine months in the
year was created, in addition to all that was used by the mills, there still remained
a taxable property which
had not been assessed in any form. The land occupied by the canals, and used in
connection with them, should be taxed to its owners, so far as its productive value
had not been made a subject of taxation as an element of the value of the mills
to whose use the water-power was appropriated. In other words, if the property taxed
had a market value above and beyond its use for the purposes of the mills, —
if it would sell for any price, subject to the obligation to furnish power to the
mills according to their contracts, — then to that extent it was not taxed
in another form, and should be taxed in the mode adopted by the assessors of Lowell."
Lowell must tax the entire water-power at Lowell; and the Lawrence water-power,
under the same jurisdiction, is necessarily taxed in the same manner. It is impossible
to tax any portion of the value of these water-powers elsewhere, without a double
taxation upon them; and it is equally impossible to take into consideration any
part of their value in fixing the taxable value of other estates, without a double
taxation to the extent that such values are taken into consideration.
7. This court has no jurisdiction over the water-power of Massachusetts.
Whatever water-power is used with mills situated in Massachusetts becomes annexed
to those mills, and is to be taxed with them, without regard to the sources of such
power; and even though the structures which are necessary to create the power lie
in part in another state, and the water-power might equally well be used in that
other state, nevertheless, it must be taxed with the mills to which it is incident,
and not elsewhere. In Boston Manufacturing Company v. The Inhabitants of Newton,
22 Pickering 22, it appealed that the Boston Manufacturing Company owned a dam half
in Waltham and half in Newton, but the entire water-power was used with mills in
Waltham, though it might have been used on the Newton side had the owners chosen
to do so. Newton assessed the company for one half the water-power of the dam; and
on trial of this issue, Shaw, C. J. says, — "The only question in this case
is, whether the town of Newton have a right to tax the plaintiff for the property,
and under the circumstances mentioned in the agreed statement of facts. In the first
place, the court are of opinion that water-power for mill purposes not used is not
a distinct subject of taxation. It is a capacity of land for a certain mode of improvement,
which cannot be taxed independently of the land. But the objection to this mode
of taxation is not the only or principal objection to the tax in question. The court
are of opinion that the water-power had been annexed to the mills, that it went
to enhance the value of the mills, and could only be taxed together with the mills,
as contributing to increase their value. As the mills were wholly situated in Waltham
and were taxable there, they were not liable to be taxed in Newton."
This shows that if the Merrimack river at Lowell constituted
the division line between Massachusetts and New Hampshire, and the water-power of
the Lowell dam was all used in Massachusetts, none of its value could be taxed in
New Hampshire, even though its very existence depended upon structures erected in
New Hampshire. No more can any part of that value be taxed in New Hampshire if it
depends upon structures higher up on the same stream, and within the state of New
Hampshire. The language of the court, in Slack v. Walcott, 3 Mason 508, is strongly
to the point. Story, J., says, — "The mill in controversy is situated in Massachusetts;
the river, the use of whose waters is claimed as appurtenant to the mill, is the
boundary of the two states, and the waters, therefore, partly flow in each state.
The right, however, is not a distinct right to the water, as terra aqua cooperta,
or as a distinct corporeal hereditament, but as an incident to the mill, and attached
to the realty. It passes by a grant of the mill, and has no independent existence.
It is not real estate situated in Rhode Island. It is an incorporeal hereditament
annexed to a freehold in Massachusetts; and a conveyance of the mill, good by the
laws of the state where the mill is situated, conveys all the appurtenances." And
further on, in the same opinion, he says, — "The public law, which declares
that the title to real estate can pass only according to the law of the place where
it is situated, supposes the thing to be tangible and fixed, and the situs clearly
intraterritorial. But where is the situs of an incorporeal right? The right to flowing
water is no more real estate, than the right to flowing air or light. The very nature
of these things forbids durable, fixed, and absolute territorial possession. It
is true that a state has jurisdiction over the waters of the rivers which flow within
its boundaries, and may, by its laws, regulate the title, enjoyment, and use of
them awhile, and so long as they flow within its boundaries. But its authority stops
here: the right to the use of the same waters, when they flow beyond its boundaries,
is not within its control. The title is not acquired under the laws of such state.
If the waters flow to a mill in another state, and the use becomes annexed to it,
the use and the title are exclusively to be governed by the laws of the latter state.
What authority has Rhode Island to control the water which flows to a mill in Massachusetts,
The right to the use of such water, whether it be deemed real or personal estate,
is a right exercised under the jurisdiction of Massachusetts, and is to be governed
by its laws."
If the jurisdiction of a state cannot affect any water-power used in another state,
even when one half the dam is in the former state and one half the water-flow within
that state, it is evident that its jurisdiction can in no form extend to water-powers
upon rivers that have flowed bodily beyond its boundaries. If the jurisdiction of
a state cannot extend from one bank of a river to the opposite bank situated in
a neighboring state, so as to tax or control any of the water-power of the river
used on the opposite bank,
then it cannot extend from one end of a river to the other, so as to tax or control
any portion of the water-power of the lower end, which is entirely outside the limits
of the state. Whatever value, then, Lowell and Lawrence estates may have, this court
has no jurisdiction over those estates, and no part of their values should be included
or considered in any way in making a valuation of New Hampshire estates.
8. The report makes a purely artificial division of an estate, which can only have
value as an entity places a valuation on each part separately, and adds the two
for a total valuation.
The second item has no value except in connection with the first. There is no reason
why a certain twelve per cent. of the water passing the dam at Lake Village should
be worth ten times as much as the other eighty-eight per cent., and there is no
reason for making such a division of the estate as is here made.
Flowage and reservoir rights are simple easements, and as such are not taxable,
and the dam and gates do not in themselves constitute an estate of such value as
is here place upon it. As a matter of fact, the entire property has been appraised
by these referees in both items. In the first item its value for all purposes of
local use and enjoyment is given in full; and in the second item the value of the
entire property as a means of enhancing the values of other estates is given in
full, — and there is no reason why these should be added, and thus a double
taxation put upon the estate.
Suppose a man to own ten acres of land in Gilford with a fine spring of water on
it, and to pipe the water to a valuable hotel property of his own in Laconia. The
Gilford selectmen say this land is worth $3,000 for all purposes of local use and
enjoyment, and it is worth $3,500 as a water-supply to the Laconia hotel property,
and hence we appraise it at $6,500. It is only placing two valuations upon the estate.
By selling the estate and reserving the use of the spring, the second method of
valuation is denied to the Gilford selectmen, and they must appraise it for its
local value only; and it should be appraised for its local value only while the
joint ownership of the estates remains. If a horse is worth $135 as a team horse,
and $140 as a carriage horse, his total valuation is not $275, though he may be
used for both purposes. If this Gilford estate is worth $135,000 for all purposes
of local use and enjoyment, and $140,000 as a means of enhancing the value of other
estates, it would seem to make but little difference in this particular case which
method of valuation be adopted, though the second method is here claimed to be radically
erroneous in principle. To adopt both methods and add the results obtained by each
is nothing more nor less than a double taxation of the estate. The referees claim
to have attempted an adjustment of valuations between this estate and the Lowell
and Lawrence estates; but the latter being beyond the jurisdiction of this court,
such an adjustment by this tribunal is impossible.
Jewell Stone, S.C. Clark, Albin Martin, and M. W. Tappan, Attorney-General, for
the defendants.