Mobile & OR Co. v. Schnipper

• Decision Date: 21 March 1929
• Docket Number: No. 110-D.,110-D.
• Citation: 31 F.2d 587
• Parties: MOBILE & O. R. CO. v. SCHNIPPER, County Collector of Taxes, et al.
• Court: U.S. District Court — Eastern District of Illinois

31 F.2d 587 (1929)

MOBILE & O. R. CO. v. SCHNIPPER, County Collector of Taxes, et al.

No. 110-D.

District Court, E. D. Illinois.

March 21, 1929.

Carl Fox, of St. Louis, Mo., and David S. Lansden, of Cairo, Ill., for plaintiff.

F. J. Tecklenburg, of Belleville, Ill., for defendants.

LINDLEY, District Judge.

This is a bill in equity of the same character as that before the court in Wilson v. Illinois Southern Railway Co. et al., 263 U. S. 574, 44 S. Ct. 203, 68 L. Ed. 456. Plaintiff seeks to restrain the collection of alleged excessive assessed taxes for the year 1927 upon the track and rolling stock of that part of plaintiff's property located within or apportionable to the state of Illinois. The bill alleges that the property was erroneously and fraudulently overvalued, out of proportion to the other taxable property of the state, in violation of the Constitution of the state of Illinois (Const. 1870, art. 9, § 1), and of the Fourteenth Amendment of the Constitution of the United States; that the tax commission assessed the property at $6,797,999 in addition to local assessments of approximately $60,000; that the said assessment amounts to the full value of plaintiff's property; that for a number of years there has been a practice throughout the state of assessing property upon the basis of not more than 40 per cent. of its fair cash value; that the commission, well knowing of this practice upon the part of the local taxing authorities, utterly disregarded it, so far as the plaintiff was concerned, and arbitrarily and fraudulently fixed the assessed value as aforesaid; that plaintiff has paid 50 per cent. of the assessment, and that such payment exceeds its proportionate share of taxes in Illinois. Defendants, tax collectors in each of the counties through which the railroad passes, deny these allegations, except as to the amount of the assessment and the payments made.

The ultimate question with which the court is concerned is whether the property of the plaintiff has by the commission been overvalued erroneously and fraudulently and out of proportion to other property. To determine this question, the court must ascertain at what rate property generally in Illinois is assessed, at what rate plaintiff's property has been assessed, and whether such assessment is of such character as to amount to fraud.

Upon the question of the custom and practice as to assessments in general in Illinois, both parties introduced extensive evidence. For the plaintiff, Dr. Simpson, of the Institute of Research at Northwestern University; A. M. Banes, engaged solely in the investigation of tax assessments; R. A. Miller, tax commissioner of the Chicago & Northwestern Railway Company; and John C. Watson, for some years in charge of the department of taxation of the Illinois Agricultural Association — all widely experienced and fully advised upon the subject-matter, testified at length concerning tax assessments in Illinois. The detailed results of their examinations of the records and their calculations were introduced. They examined the records of conveyances in which the consideration was expressed in dollars quite generally throughout Illinois, including those of the counties through which the plaintiff's railroad extends. They obtained from the proper records the assessed value of each of the properties described in the respective conveyances of the recorders' offices in each county.

Their testimony was of the same character as that discussed and approved by the court in People v. C., B. & Q. R. R. Co., 300 Ill. at page 405, 133 N. E. 325. Their records are voluminous, and the court will not attempt to discuss in detail their testimony. Dr. Simpson confined his investigation to assessments in the city of Chicago, which he found to average 35.90 per cent. of the apparent full values. Mr. Banes confined his investigations to 24 counties, and found the average assessment to be 36.71 per cent.; Mr. Miller investigated assessments in 22 counties and found them to average 37.96 per cent.; Mr. Watson examined the records as to farm lands and city properties in 61 counties and found the average assessment to be 38.50 per cent. The Illinois state tax commission in 1920 reported that it had conducted a general and thorough investigation as to the ratio of assessment of lands, and had found that assessments varied from as low as 30 per cent. of their value up to as high as 60 per cent. At that time it equalized assessments by reducing those assessed over 50 per cent. and raising those assessed under 40 per cent., so that, after equalization, all lands within the state were, according to its judgment, assessed at not less than 40 per cent. and not more than 50 per cent. of their actual value. The evidence fails to show that these percentages have been since increased in the state as a whole.

For defendants, Mr. Young, the assessor of Monroe county; Mr. Dewey, the recorder of Alexander county; Mr. Thorp, the county clerk of Jackson county; and Mr. Watson, assessor of Randolph county, furnished testimony similar to that of the witnesses for the plaintiff. Mr. Young said that the assessments in his county averaged 55.75 per cent., but upon cross-examination it was shown he had omitted numerous conveyances from his calculations. Mr. Dewey's examination covered only six-month periods in each of four years. For those periods the assessments averaged 54.9 per cent. But it appeared that, if he had continued his examination over the period ending April 1, 1927, his calculation would have run 52.38 per cent., and that, if he had included two conveyances which were omitted, his result for the latter year would have been 38.65 per cent. Mr. Thorp likewise confined his investigation to six-month periods, and arrived at a calculation of 63 per cent. He made no separate calculation for either 1926 or 1927. Mr. Watson confined his investigations to the years 1923 to 1925, and found an average assessment of 51.9 per cent. He did not investigate the 1927 assessment of lands, which the tax commission had reduced 15 per cent. in his county. Some other witnesses for the defendants testified that they had made no examination of the records, but that they had an opinion as to assessment of lands generally. Obviously such testimony is of little aid to the court in determining the actual facts.

The record discloses that no assessing authority in the state of Illinois attempts to comply with the law. The court, therefore, must determine as best it can the actual assessment of property in the state of Illinois for tax purposes. Extending to defendants every presumption in support of the acts of the commission, resolving in their favor every doubt in the record, from all the evidence offered the conclusion is inevitable that property generally in Illinois is assessed at rates at the most not exceeding 47 per cent. of its actual value. The court finds itself strongly of the belief that assessments quite generally are much less, probably not in excess of 40 per cent.; but, in view of the rule governing the court's limitations in reviewing the work of assessing bodies, it has adopted as beyond cavil a percentage of not to exceed 47 per cent. as fully inclusive of the maximum of assessments upon the properties of other taxpayers.

Having ascertained the maximum rate at which other property in the state of Illinois is assessed, it becomes necessary to determine whether the commission in making the assessment complained of wrongfully failed to adopt the same rule as to the plaintiff, and in violation of its constitutional rights assessed plaintiff's property at an excessively higher rate. The assessment of the state tax commission found the full value of all of plaintiff's property taxable in Illinois to be $6,797,999. It fixed the assessed value at the same amount. In its formal finding and assessment, therefore, the commission first determined the full value of plaintiff's property and then assessed it at 100 per cent. thereof. If the commission found the proper full value, then in order to follow the Constitution of Illinois, and in order to comply with the Fourteenth Amendment of the Constitution of the United States, in view of its general practice, and that of other assessing authorities, it was its duty to fix the assessed value at 47 per cent. thereof, or $3,195,049. In other words, if we adopt the commission's own figure, it has glaringly omitted to accord to the plaintiff its legal rights. The court would be warranted in disposing of this case without further consideration, upon the finding that, when the tax commission found the full value to be $6,797,999, it was bound to levy only such an assessment as was general in the state of Illinois, or not exceeding 47 per cent. thereof.

But the defendants now contend that the full value was in excess of that found by the commission, and the respective parties have offered voluminous testimony as to the value of that part of the plaintiff's property taxable within the state of Illinois. Both parties furnished evidence as to the market value of the outstanding securities issued by the plaintiff company; the net railway operating income of plaintiff for a number of years; the net operating income from the portions located in Illinois alone; the net cost of the railroad in 1913; the value of the property as determined by capitalization of the earnings generally, and in Illinois particularly, at various rates of interest; and otherwise as to the character and value of the specific property.

The facts are undisputed that the bonds and trust obligations of plaintiff are of the par value of $35,223,000; that 16.77 per cent. of mileage owned and 14.6 per cent. of the mileage operated by the company is located within Illinois; that the entire railroad extends from East St. Louis, Ill., to Mobile, Ala., and that it owns no terminal facilities at its northern terminus in Illinois. The evidence further shows that...