Norfolk & W. Ry. Co. v. Board of Public Works

• Decision Date: 16 June 1933
• Citation: 3 F. Supp. 791
• Court: U.S. District Court — Southern District of West Virginia
• Parties: NORFOLK & W. RY. CO. v. BOARD OF PUBLIC WORKS OF WEST VIRGINIA.

3 F. Supp. 791

NORFOLK & W. RY. CO. v. BOARD OF PUBLIC WORKS OF WEST VIRGINIA.

District Court, S. D. West Virginia, at Charleston.

June 16, 1933.

Robert E. McCabe, of Charleston, W. Va., and Joseph M. Crockett, of Welch, W. Va. (Theodore W. Reath, of Philadelphia, Pa., on the brief), for plaintiff.

Homer A. Holt, Atty. Gen., and Philip Simms and John T. Simms, both of Charleston, W. Va. (Simms & Simms, of Charleston, W. Va., on the brief), for defendants.

Before PARKER and NORTHCOTT, Circuit Judges, and McCLINTIC, District Judge.

NORTHCOTT, Circuit Judge.

This is a suit in equity brought in the District Court of the United States for the Southern District of West Virginia, at Charleston, seeking to enjoin the defendants and each of them from collecting or attempting to collect from plaintiff certain unpaid balances of taxes assessed against the plaintiff for the year 1932 and seeking to set aside an order of the circuit court of McDowell county of West Virginia, imposing upon the plaintiff certain taxes levied for the year 1932. The allegation upon which the relief is sought is that that part of the railroad operated by the plaintiff in the state of West Virginia was assessed at more than its true and actual value for the year 1932 and that the plaintiff was discriminated against in the assessment of railroad properties for that year.

Upon bringing of the suit the District Judge convened a three-judge court under section 266 of the Judicial Code, as amended (28 USCA § 380). It was agreed between the parties that no action would be taken by the auditor of the state pending a decision of this court and no temporary injunction was granted.

The plaintiff is a corporation organized and existing under the laws of Virginia and a citizen of that state, having its principal office at Roanoke, Va.; and is engaged in the operation of a steam and electric railroad, which it owns, running through several states, among them the state of West Virginia. Under the statutes of West Virginia, interstate railroads running through that state are assessed by the board of public works, consisting of the governor, secretary of state, treasurer, auditor, state superintendent of free schools, attorney general, and the commissioner of agriculture. All railroads are required to make a return, giving certain detailed information, in writing on the 1st day of April of each year to the tax commissioner of the state for the year ending on the 31st day of December next preceding. The tax commissioner is required to arrange, collate, and tabulate these returns for the use and information of the board of public works. The tax commissioner is required to sit with the board but does not have a vote in fixing the assessment. An appeal from any railroad assessment made by the board is allowed by providing for an appeal to the circuit court of the county in which the largest assessment of such railroad was made in the next preceding year. The circuit court is authorized to raise or lower the assessment according to the conclusion the judge may reach from the evidence presented on the appeal, the case being conducted de novo. No provision is made for any appeal from the action of the circuit court in fixing the value for purposes of taxation. The assessment is required by law to be fixed at the true and actual value of the property as of the 1st day of January of each year and the statute (Code 1931, 11-3-1), further provides that by true and actual value is meant "the price for which such property would sell if voluntarily offered for sale by the owner thereof, upon such terms as such property, the value of which is sought to be ascertained, is usually sold, and not the price which might be realized if such property was sold at a forced sale." In the event of failure to pay the tax the state auditor is required to certify to the sheriff of each county the amount of taxes assessed within his county for collection. Provisions of the West Virginia Code covering these points will be found in chapter 11 of the Code of 1931.

Pursuant to the provisions of the law, the board of public works of West Virginia placed a valuation for purposes of taxation upon that portion of plaintiff's railroad lying in West Virginia, for the year 1932, of $65,000,000. From this action of the board the plaintiff took an appeal to the circuit court of McDowell county, that being the county where the largest assessment was made of its property in any of the counties of West Virginia for the year 1931. Evidence was introduced before the judge of the circuit court and that judge in an able and exhaustive opinion confirmed the action of the board of public works in fixing the value of the property at $65,000,000 and entered an order to that effect.

In the appeal taken by the plaintiff to the circuit court of McDowell county it was also alleged that the assessment was invalid as being violative of the equal protection clause of the Fourteenth Amendment to the Constitution of the United States and of section 1, article 10, of the Constitution of West Virginia, in that the property of the plaintiff was assessed at a higher relative value than the property of other railroads in the state of West Virginia, especially the Baltimore & Ohio and Chesapeake & Ohio railroads and at a relatively higher value than other property in the counties through which plaintiff's line ran. On this point the judge of the circuit court also held against plaintiff's contention, pointing out that there was no evidence offered as to the value of other railroads, the value for assessment of which was compared with that of the plaintiff, and further holding that other property in the section through which the railroad ran was valued for taxation at an equal level with that of plaintiff's property.

At the beginning of the hearing before this court a motion was made to dismiss the suit as one not being properly cognizable under section 266 of the Judicial Code, as amended. This motion was argued and submitted at the same time with the other question involved.

We are of the opinion that the motion to dismiss should be denied and that the suit is one of which a three-judge court should have jurisdiction. In Henrietta Mills Co. v. Rutherford County, N. C. (D. C.) 26 F.(2d) 799, 800, Judge Parker of this court ably discusses this question and says that four things are necessary to bring a case within the statute, to wit: "(1) That an interlocutory injunction is sought; (2) that such injunction will result in suspending or restraining the enforcement, operation, or execution of a statute of a state, or the order of an administrative board or commission acting under or pursuant to statute; (3) that the ground upon which the interlocutory injunction is asked is the unconstitutionality of the statute or order; and (4) that it is sought to restrain by the interlocutory injunction the action of an officer of the state."

An examination of the record in this case shows that all four of these requisites are present. It is strongly contended on behalf of the defendants that the sheriffs of the respective counties are, in effect, the only officers sought to be enjoined, as they are the only officers who could actually enforce collection of the taxes involved, and that they are not state officers but are county officers under the Constitution and statute of West Virginia (section 1, article 10, Constitution of West Virginia; Code of West Virginia, chapter 7, article 5, § 1). This contention cannot be maintained because it must be remembered that under chapter 11, article 6, § 18 of the Code of West Virginia the sheriffs act only upon the certificate of the state auditor and cannot levy for collection of taxes until that certificate is received by them. One of the purposes of this suit is to enjoin the auditor from making such a certificate.

In Stratton v. St. Louis Southwestern Railway Co., 282 U. S. 10, 51 S. Ct. 8, 10, 75 L. Ed. 135, the court says: "If an application for an interlocutory injunction is made and pressed to restrain the enforcement of a state statute, or of an administrative order made pursuant to a state statute, upon the ground that such enforcement would be in violation of the Federal Constitution, a single judge has no jurisdiction to entertain a motion to dismiss the bill on the merits. He is as much without power to dismiss the bill on the merits as he would be to grant either an interlocutory or a permanent injunction."

See, also, Chicago, B. & Q. R. Co. v. Osborne, 265 U. S. 14, 44 S. Ct. 431, 68 L. Ed. 878; Chicago Great Western R. Co. v. Kendall, 266 U. S. 94, 45 S. Ct. 55, 69 L. Ed. 183; Chicago, I. & L. R. Co. v. Lewis (D. C.) 12 F.(2d) 802; Cumberland Pipe Line Co. v. Lewis (D. C.) 17 F.(2d) 167; Western Union Telegraph Co. v. Tax Commission (D. C.) 21 F.(2d) 355.

On the hearing on the merits before this court, by stipulation, the evidence and the entire record before the circuit court of McDowell county was introduced and some additional evidence offered. This additional evidence dealt mainly with the going concern value of the plaintiff's railroad.

The action of the board of public works of West Virginia in fixing the value of plaintiff's railroad property within the state is presumed to be correct, and the burden rests upon the plaintiff to overthrow that presumption by evidence. The chief complaint made by the plaintiff is as to the method used by the board in arriving at the value, chiefly because, as was shown, the board had before it for consideration certain work sheets submitted to the board by the tax commissioner, showing that estimates were made based upon the earnings and dividend paying history of the road and the average value of the stock and bonds of the railroad over a period of five years. The evidence shows that in fixing the value for purposes of taxation the board considered, among other things, the returns of the railroad, the value of the stock and...