This action is based upon the following section of the statute with regard to taxation:—
“ Sec. 5. The secretary or treasurer of every railroad company, any portion of whose road is in this state, shall, within the first ten days of October, annually, deliver to the comptroller a sworn statement of the number of shares of its stock, and the market value of each share, the amount and market value of its funded and floating debt, the amount of bonds issued by any town or city of the description mentioned in the twelfth section of chapter first of this title, when the avails of such bonds or stock subscribed and paid for therewith shall have been expended in such construction, the amount of cash on hand on the first day of said month, the whole length of its road, and the length of those portions thereof lying without this state.
“ See. 6. Each of such railroad companies shall, on or before the twentieth day of October, annually, pay to the state one per cent, of the valuation of said stock and funded and floating debt and bonds as contained in said 'statement, after deducting from such valuation the amount of cash on hand, and from said sum required to be paid the amount paid for taxes upon the real estate owned by it and not used for railroad purposes; and the valuation so made, and corrected by the board of equalization, shall be the measure of value of such railroad, its rights, franchises and property in this, state for purposes of taxation; and this sum shall be in lieu of all other taxes on its franchises, funded and floating debt, and railroad property in this state.”
The defendants claim the exemption from taxation under this statute of the amount in controversy in this suit, under the following act passed in 1876:—“When only part of a railroad lies in this state, the company owning such road shall pay one per cent, on such proportion of the above named valuation as the length of its road lying in this state bears to the -entire length of said road.”
*53We agree with the counsel for the defendants, that these statutes seek to ascertain the value of the property of railroad companies, lying within this state, devoted to railroad purposes, and to tax that value. This was so held in the case of Nichols v. The New Haven & Northampton Company, 42 Conn., 103, and is clearly correct. These statutes proceed upon the idea that the market value of the stock of railroad companies, with their funded and floating debt, and the amount of certain bonds described, the proceeds of which have been expended in the construction of the roads after making certain deductions from the entire amount, fairly represent the value of the property of railroad companies used for railroad purposes, and therefore they take that amount as the basis of taxation. It is manifest that the debts of a company must be considered in ascertaining the value of its capital stock, for such debts must be paid out of the property of the company, and the capital stock takes its value from what remains of the property after the payment of such debts. Thus, if a company has capital stock to the amount of $1,000,000, and is indebted to the same amount, and has property of the value of only $1,000,000, the stock of the company would be worthless, for its debts would require the entire property of the company to pay them. But if the stock of a company with such a capital should be found to be worth fifty cents on the dollar, then the property of the company must be worth $1,500,000, for in that case $500,000 worth of property would remain after the debts had been paid, and this would be applied on the capital stock, and would be sufficient to pay it to the extent of one-half, or fifty cents on each dollar of the stock. Hence the true value of the stock of a company, with the amount of the debts of the company, must represent the value of its property.
The statutes in question, for purposes of taxation, take the market value of the stock of railroad companies as its true value. This is done for purposes of convenience. Ordinarily the market value of such stock differs but little from its real value, and there is no convenient mode by which a more accurate valuation of the stock could be made.
*54We come now to the consideration of the claim of the defendants. They insist that their case comes within the provision of the act of 1876. This act, as we have seen, provides that “where only a part of a railroad lies in this state, the company owning such road shall pay one per cent, on such proportion of the above named valuation as the length of its road lying in this state bears to the entire length of said road.”
Suppose that when the. defendants made their contracts with the Massachusetts corporations for the use of their roads, those roads had not been made, and the defendants had constructed them under a charter from that state authorizing them to do it, and had expended in such construction an amount equal to what the Massachusetts corporations have expended, then there would have been added to the defendants’ present valuation under the sixth section of the statute, more than one million of dollars, which would have made their proportional taxation by the state more than the state now claims.
Again, suppose that when the defendants made their contracts they had purchased these roads of the Massachusetts corporations, if a purchase could lawfully have been made, and had paid them an amount equal to what the sum they yearly pay for the use of those roads capitalized at the rate of six per cent, would amount to; that sum, with the five hundred thousand dollars they have expended in improvements along the line of those roads, would again make more than one million of dollars in addition to the present valuation of the defendants’ property under the sixth, section of the statute; and this again would make their proportional tax larger than the amount the state now claims.
But if it be claimed by the defendants that the five hundred thousand dollars has gone into the valuation by the increased value of their stock and by the increase of their floating debt, still the eight hundred thousand dollars has not gone into the valuation, and that sum in addition to their present valuation would make their proportional tax nearly as large as the amount the state now claims.
*55Again, suppose the defendants should sell their interest in those roads back to the Massachusetts corporations, what would they receive on such sale? If the sum they yearly pay for the use of those roads is nothing more nor less than a fair compensation for such use, they would receive on such sale nothing more than compensation for the improvements they have made along the line of those roads, that is, the sum of five hundred thousand dollars, for they would have nothing else that was valuable to convey to them.
How then can the defendants claim to own those roads within the meaning of the statute ? To own them within its meaning would be to own them as they own their road within this state. The statute proceeds upon the idea that the value of that portion of a road out of the state and that of its rolling stock will, in some form, enter into and enhance the valuation of the property of the company under the sixth section of the statute. The statute means simply to tax all the property of a railroad company which lies within this state and is devoted to railroad purposes. Where the road lies wholly within this state there is of course no difficulty. But here is a road which lies partly within and partly without the state. It is all under one management. The company’s stock covers the whole road. Its funded and floating debt covers the whole. How shall its property lying within this state be taxed? Shall it be separately appraised item by item? That would not be practicable, or at least would involve great trouble and expense. The statute has conceived the way it can be conveniently done without trouble or expense. It takes the whole market value of the stock, and the whole funded and floating indebtedness of the company, and says that this amount shall be taken to be the whole value of the property of the company devoted to railroad purposes both in and out of the state. It then deducts from the whole amount the market value of the property which lies out of the state. This is done in this way. The amount of property lying in each state is regarded by the statute as being in proportion to the length of the road in each state. The property is- so divided, and the property lying out of the *56state is deducted from the whole amount of the property of the company as previously ascertained in the mode prescribed by the statute. Thus the amount of the property lying in the state is satisfactorily ascertained. No property lying within the state devoted to railroad purposes is intended to be exempted from taxation. It is simply an ingenious mode of ascertaining the amount of the property to be taxed. The property lying out of the state is first included in the valuation, because the computation cannot otherwise be made, and then it is deducted. No more is intended to be thus deducted than was thus first included. It is a mere process in mathematics.
The difficulty with the defendants’ claim is that it adds but little and subtracts a great deal. The company has but little property out of the state to be added, but they propose to subtract the entire valué of both roads out of the state. But what has entered into the amount of the final valuation from those roads in Massachusetts ? Nothing whatever but a portion of the floating debt of the defendants, to what extent does not appear, and some increased value of the preferred stock of the company, to what extent likewise does not appear. The defendants claim that at least one-half the value of their stock grows out of their interest in those roads. If this was true, the valuation of their property under the sixth section of the statute would fall far below what it would have been if the cost or value of those roads had gone into the valuation to enhance the amount. The entire stock of the defendants is worth but a little over one million of dollars; consequently but half that sum would be represented in the valuation, growing out of the defendants’ interest in those roads. But they are paying for the use of those roads the sum of forty-eight thousand dollars annually. They are therefore paying interest at six per cent, on a capital of eight hundred thousand dollars, which must be very nearly the value of those roads when they came into their hands. But this is not all. The defendants have expended five hundred thousand dollars in improvements along the line of those roads. These two sums together make thirteen *57hundred thousand dollars, which leaves the sum of eight hundred thousand dollars unrepresented in the valuation under the sixth section of the statute.
But is it true that the defendants’ stock receives one-half its value from their interest in those roads ? No doubt the value of the stock is enhanced by such interest, inasmuch as the cost of the improvements made by the defendants upon those roads was paid in part by their ready money, and to that extent, if the value of the improvements were worth the expenditure, the value of the stock must be increased.
Again, the defendants claim that the value of their stock is greatly increased, from the fact that their road and the Massachusetts roads, taken together, make a trunk line from points on the Boston & Albany railroad to Long Island Sound, and that sixty per cent, of their income grows out of their connection with those roads. But without doubt they would have had a connection with those roads if they had had no interest in them, for the interest of all the roads would have required such a connection. About all the difference seems to be, that the roads are now bound together by a perpetual contract, while without a contract they would have been bound together by their common interest. But the defendants’ stock is probably somewhat enhanced in value by their permanent connection with those roads. It does not appear to what extent, but it cannot be to a very great one.
So far as the defendants’ stock has been increased in value by their interest in the Massachusetts roads, and so far as their floating debt has been increased by the making of permanent improvements along these roads, they ought to have the benefit of these facts in a proportional reduction of their tax; and no doubt, if the matter was brought to the attention of the legislature, a proper reduction would be made. But the courts have no power to do equity in the matter.
The conclusion then is, that the defendants do not own the Massachusetts roads within the meaning of the statute of 1876, whatever their interest in them may be called.
There is no error in the judgment below.
In this opinion the other judges concurred.