Wallace v. Hines

• Decision Date: 03 May 1920
• Docket Number: No. 683,683
• Citation: 64 L.Ed. 782,253 U.S. 66,40 S.Ct. 435
• Parties: WALLACE et al. v. HINES, Director General of Railroads, et al
• Court: U.S. Supreme Court

253 U.S. 66

40 S.Ct. 435

64 L.Ed. 782

WALLACE et al.

v HINES, Director General of Railroads, et al.

No. 683.

Argued April 21, 1920.

Decided May 3, 1920.

Mr. F. E. Packard, of Bismarck, N. D., for appellants.

Mr. E. Marvin Underwood, of Washington, D.C., for appellee Hines.

Mr. Charles W. Bunn, of St. Paul, Minn., for appellees railway companies.

Mr. Justice HOLMES delivered the opinion of the Court.

This is an appeal from an order of three judges restraining the defendants, the appellants, from taking steps to enforce taxes imposed by an act of North Dakota, approved March 7, 1919, (c. 222,) until the further order of the Court. The plaintiff railroads are corporations of other States with lines extending into North Dakota. The defendants are the State Tax Commissioner, the State Treasurer, the State Auditor, the Attorney General and the Secretary of State for North Dakota. As the tax is made a first lien upon all the property of the plaintiff railroads in the State and thus puts a cloud upon their title, and as delay in payment is visited with considerable penalties, there is jurisdiction in equity unless there is an adequate remedy at law against the State, to which the tax is to be paid. Shaffer v. Carter (March 1, 1920) 252 U. S. 37, 40 Sup. Ct. 221, 64 L. Ed. 445; Gaar, Scott & Co. v. Shannon, 223 U. S. 468, 472, 32 Sup. Ct. 236, 56 L. Ed. 510. The only ground for supposing that there is such a remedy is a provision that 'an action respecting the title to property, or arising upon contract may be brought in the district court against the State the same as against a private person.' Compiled Laws, N. D. 1913, § 8175. This case does not arie upon contract except in the purely artificial sense that some claims for money alleged to have been obtained wrongfully might have been enforced at common law by an action of assumpsit. Nothing could be more remote from an actual contract than the wrongful extortion of money by threats, and we ought not to leave the plaintiffs to a speculation upon what the State Court might say if an action at law were brought. Union Pacific R. R. Co. v. Weld County, 247 U. S. 282, 38 Sup. Ct. 510, 62 L. Ed. 1110.

We quote the tax law in full.¹ It will be seen that it purports to be a special excise tax upon doing business in the State. As the law is administered, the tax commissioner fixes the value of the total property of each railroad by the total value of its stocks and bonds and assesses the proportion of this value that the main track mileage in North Dakota bears to the main track of the whole line. But on the allegations of the bill which is all that we have before us, the circumstances are such as to make that mode of assessment indefensible. North Dakota is a State of plains, very different from the other States, and the cost of the roads there was much less than it was in mountainous regions that the roads had to traverse. The State is mainly agricultural. Its markets are outside its boundaries and most of the distributing centers from which it purchases also are outside. It naturally follows that the great and very valuable terminals of the roads are in other States. So looking only to the physical track the injustice of assuming the value to be evenly distributed according to main track mileage is plain. But that is not all.

The only reason for allowing a State to look beyond its borders when it taxes the property of foreign corporations is that it may get the true value of the things within it, when they are part of an organic system of wide extent, that gives them a value above what they otherwise would possess. The purpose is not to expose the heel of the system to a...