Atchison, Topeka and Santa Fe Ry. Co. v. Lennen

• Decision Date: 27 April 1984
• Docket Number: MISSOURI-KANSAS-TEXAS,82-1878 and 82-1891,Nos. 82-1873,s. 82-1873
• Citation: 732 F.2d 1495
• Parties: The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, et al., Plaintiffs-Appellees, v. Michael LENNEN, et al., Defendants-Appellants, UNION PACIFIC RAILROAD COMPANY, et al., Plaintiffs-Appellees, v. The DEPARTMENT OF REVENUE OF the STATE OF KANSAS, et al., Defendants-Appellants, CHICAGO, ROCK ISLAND AND PACIFIC RAILROAD COMPANY, et al., Plaintiffs-Appellees, v. Michael LENNEN, et al., Defendants-Appellants,RAILROAD COMPANY, Plaintiffs-Appellees, v. Michael LENNEN, et al., Defendants-Appellants, BURLINGTON NORTHERN, INC., et al., Plaintiffs-Appellees, v. Philip W. MARTIN, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1495

732 F.2d 1495

The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, et al., Plaintiffs-Appellees, v. Michael LENNEN, et al., Defendants-Appellants, UNION PACIFIC RAILROAD COMPANY, et al., Plaintiffs-Appellees, v. The DEPARTMENT OF REVENUE OF the STATE OF KANSAS, et al., Defendants-Appellants, CHICAGO, ROCK ISLAND AND PACIFIC RAILROAD COMPANY, et al., Plaintiffs-Appellees, v. Michael LENNEN, et al., Defendants-Appellants, MISSOURI-KANSAS-TEXAS RAILROAD COMPANY, Plaintiffs-Appellees, v. Michael LENNEN, et al., Defendants-Appellants, BURLINGTON NORTHERN, INC., et al., Plaintiffs-Appellees, v. Philip W. MARTIN, et al., Defendants-Appellants.

Nos. 82-1873, 82-1878 and 82-1891.

United States Court of Appeals Tenth Circuit.

April 27, 1984.

Carol B. Bonebrake, Atty., Dept. of Revenue, Topeka, Kan. (James J. McGannon of Regan & McGannon, Wichita, Kan., with her on the brief), for the state defendants-appellants/cross-appellees.

Robert J. O'Connor, Wichita, Kan. (Jeff A. Roth, of Hershberger, Patterson, Jones & Roth, Wichita, Kan., Donald J. Horttor and Grant M. Glenn of Cosgrove, Webb & Oman, Topeka, Kan., and Paul M. Buchanan, Asst. County Counselor, Wichita, Kan., with him on the brief), for the county defendants-appellants/cross-appellees.

Robert C. Foulston, Wichita, Kan. (Jay F. Fowler, Wichita, Kan., with him on the brief), of Foulston, Siefkin, Powers & Eberhardt, Wichita, Kan., for plaintiffs-appellees/cross-appellants.

Before McKAY, LOGAN and SEYMOUR, Circuit Judges.

LOGAN, Circuit Judge.

This is an appeal from an order enjoining defendants Kansas Secretary of Revenue Michael Lennen, Director of Property Valuation of the Kansas Department of Revenue Philip Martin, and the Kansas Department of Revenue ("state defendants") from assessing the plaintiff railroads' property at more than 12.4% of true market value as the basis for 1980 property taxes. Atchison Topeka and Santa Fe Railway v. Lennen, 552 F.Supp. 1031 (D.Kan.1982). A number of Kansas county treasurers ("county defendants") intervened as defendants in this case, and they also appeal. Plaintiffs cross-appeal from an order dismissing their claims for restitution of alleged overpayment of property taxes for 1979.

All defendants contend on appeal that the district court erred (1) by allowing plaintiffs to prove the assessment ratio for "all other commercial and industrial property" by means of a study based on real property only; (2) by not giving proper weight to the assessment ratio for state-assessed property other than railroad property in determining the assessment ratio for "all other commercial and industrial property"; and (3) by admitting the official Kansas sales assessment ratio study into evidence. The county defendants argue that the district court should have ordered the Wichita railroads to pay 18% interest on their delinquent 1980 taxes. On cross-appeal plaintiffs argue that the district court erred in ruling that the railroads could not receive restitution for overpayment of 1979 taxes.

The Statute

In 1976 Congress enacted legislation prohibiting states from discriminating against rail transportation property in the assessment, levying, and collection of property taxes. Railroad Revitalization and Regulatory Reform Act of 1976, Pub.L. No. 94-210, Sec. 306, 90 Stat. 31, 54. ¹ Section 306 was first codified at 49 U.S.C. Sec. 26c. The language of Sec. 306 was changed and recodified at 49 U.S.C. Sec. 11503 as part of the Revised Interstate Commerce Act of 1978, 49 U.S.C. Secs. 10101-11917. Because the revision was not intended to change the law, we must resolve any substantive conflicts between the original language of Sec. 306 and the language in Sec. 11503 in favor of the original language. Atchison, Topeka and Santa Fe Railway v. Lennen, 640 F.2d 255, 257-58 (10th Cir.1981). Because this appeal involves difficult questions of statutory construction, the original language of Sec. 306 is important. That section provided:

"Part I of the Interstate Commerce Act (49 U.S.C. 1 et seq.), as amended by this Act, is further amended by inserting therein a new section 28, as follows:

'Sec. 28. (1) Notwithstanding the provisions of section 202(b), any action described in this subsection is declared to constitute an unreasonable and unjust discrimination against, and an undue burden on, interstate commerce. It is unlawful for a State, a political subdivision of a State, or a governmental entity or person acting on behalf of such State or subdivision to commit any of the following prohibited acts:

'(a) The assessment (but only to the extent of any portion based on excessive values as hereinafter described), for purposes of a property tax levied by any taxing district, of transportation property at a value which bears a higher ratio to the true market value of such transportation property than the ratio which the assessed value of all other commercial and industrial property in the same assessment jurisdiction bears to the true market value of all such other commercial and industrial property.

'(b) The levy or collection of any tax on an assessment which is unlawful under subdivision (a).

'(c) The levy or collection of any ad valorem property tax on transportation property at a tax rate higher than the tax rate generally applicable to commercial and industrial property in the same assessment jurisdiction.

'(d) The imposition of any other tax which results in discriminatory treatment of a common carrier by railroad subject to this part.

'(2) Notwithstanding any provision of section 1341 of title 28, United States Code, or of the constitution or laws of any State, the district courts of the United States shall have jurisdiction, without regard to amount in controversy or citizenship of the parties, to grant such mandatory or prohibitive injunctive relief, interim equitable relief, and declaratory judgments as may be necessary to prevent, restrain, or terminate any acts in violation of this section, except that--

'(a) such jurisdiction shall not be exclusive of the jurisdiction which any Federal or State court may have in the absence of this subsection;

'(b) the provisions of this section shall not become effective until 3 years after the date of enactment of this section;

'(c) no relief may be granted under this section unless the ratio of assessed value to true market value, with respect to transportation property, exceeds by at least 5 per centum the ratio of assessed value to true market value, with respect to all other commercial and industrial property in the same assessment jurisdiction;

'(d) the burden of proof with respect to the determination of assessed value and true market value shall be that declared by the applicable State law; and

'(e) in the event that the ratio of the assessed value of all other commercial and industrial property in the assessment jurisdiction to the true market value of all such other commercial and industrial property cannot be established through the random-sampling method known as a sales assessment ratio study (conducted in accordance with statistical principles applicable to such studies) to the satisfaction of the court hearing the complaint that transportation property has been or is being assessed or taxed in contravention of the provisions of this section, then the court shall hold unlawful an assessment of such transportation property at a value which bears a higher ratio to the true market value of such transportation property than the assessed value of all other property in the assessment jurisdiction in which is included such taxing district and subject to a property tax levy bears to the true market value of all such other property, and the collection of any ad valorem property tax on such transportation property at a tax rate higher than the tax rate generally applicable to taxable property in the taxing district.

'(3) As used in this section, the term--

'(a) "assessment" means valuation for purposes of a property tax levied by any taxing district;

'(b) "assessment jurisdiction" means a geographical area, such as a State or a county, city, township, or special purpose district within such State which is a unit for purposes of determining the assessed value of property for ad valorem taxation;

'(c) "commercial and industrial property" or "all other commercial and industrial property" means all property, real or personal, other than transportation property and land used primarily for agricultural purposes or primarily for the purpose of growing timber, which is devoted to a commercial or industrial use and which is subject to a property tax levy; and

'(d) "transportation property" means transportation property, as defined in regulations of the Commission, which is owned or used by a common carrier by railroad subject to this part or which is owned by the National Railroad Passenger Corporation.'."

Railroad Revitalization and Regulatory Reform Act of 1976, P.L. No. 94-210, Sec. 306, 90 Stat. 31, 54-55.

Kansas Property Taxation

Kansas law requires that all property subject to a property tax be assessed at 30% of its fair market value. Kan.Stat.Ann. Sec. 79-1439. Each year the Kansas director of property valuation appraises railroads and other public utilities on a unit basis. The director determines the total value of a particular public utility, including both real and personal property, and then determines the portion of that value that is to be assigned to Kansas and the portion of the Kansas value that is to be assigned to each county. County appraisers, rather than state appraisers, determine the value of other property in Kansas subject to property taxation. They appraise personal property each year, but they appraise real property less frequently because Kansas law prohibits countywide reappraisal of real property as the basis for levying taxes until the director of property valuation certifies reappraisal. Kan.Stat.Ann. Sec. 79-1451. The last reappraisal of...