Cent. R. Co. of N.J. v. Martin

• Decision Date: 11 December 1934
• Docket Number: Nos. 218, 236.,s. 218, 236.
• Citation: 175 A. 637
• Parties: CENTRAL R. CO. OF NEW JERSEY et al. v. MARTIN, State Tax Com'r, et al. PENNSYLVANIA R. CO. et al. v. BOARD OF TAX APPEALS et al.
• Court: New Jersey Supreme Court

175 A. 637

CENTRAL R. CO. OF NEW JERSEY et al.

v. MARTIN, State Tax Com'r, et al.

PENNSYLVANIA R. CO. et al.

v. BOARD OF TAX APPEALS et al.

Nos. 218, 236.

Supreme Court of New Jersey.

Dec. 11, 1934.

Certiorari proceedings by the Central Railroad Company of New Jersey and others against J. H. Thayer Martin, State Tax Commissioner, and others, and by the Pennsylvania Railroad Company and others against the Board of Tax Appeals and others, for the review of assessments and taxes for 1933 on property used for railroad purposes.

Writs dismissed.

Argued June term, 1934, before TRENCHARD, HEHER, and PERSKIE, JJ.

Maximilian M. Stallman, of Newark, and Robert J. Bain, of Jersey City (Alexander H. Elder, of New York City, of counsel), for prosecutors Central R. Co. of New Jersey et al.

Wall, Haight, Carey & Hartpence, of Jersey City, for prosecutors Pennsylvania R. Co. et al.

David T. Wilentz, Atty. Gen. (Duane E. Minard, of Newark, and John Solan, of Trenton, of counsel), for respondents.

PERSKIE, Justice.

The writs in these cases, Nos. 218 and 236, May term, 1934, embrace all of the railroad companies in our state except the New York & Long Branch Railroad Company.

In case No. 218, there are 48 separate writs of certiorari, and they embrace all of the companies except those constituting the Pennsylvania Railroad system.

In case No. 236, there are 16 separate writs of certiorari, and they embrace the various companies constituting the Pennsylvania Railroad system.

The subject-matter of all the writs involves the assessments and taxes for the year 1933, upon first and second class property; tangible and personal property; and remaining property, including the franchise. These assessments and taxes are as follows:

Assessment Taxes.

Central Railroad Company of.

.................... $102,351,077 $3,841,726

......... 45,694,813 1,714,301

Delaware, Lackawanna and.

............. 85,386,862 3,304,074

................... 50,136, 198 1,880,872

New York, Susquehanna &

............. 9,147,081 339.239

..... 30,010,832 1, 183,235

.............. 24,369,691 540,098

......... 1,007,789 40,829

Lehigh & Hudson River Rail............................ 2,144,429 85,048

(with whom are associated 16 prosecutors connected with the.

Pennsylvania system (No. 236) 133,518,341 6,063,325

Assessment

Taxes

Central Railroad Company of New Jersey

$102,351,077

$3,841,726

Lehigh Valley Railroad

45,694,813

1,714,301

Delaware, Lackawanna and Western Railroad

85,386,862

3,304,074

Erie Railroad

50,136, 198

1,880,872

New York, Susquehanna & Western Railroad

9,147.081

339,239

New York Central Railroad

30.010,832

1, 183,235

Reading Company

24,309,691

540,098

Raritan River Railroad

1,007,789

40,829

Lehigh & Hudson River Rallroad

2,144,429

85,048

(with whom are associated 16 prosecutors connected with the Pennsylvania system (No. 236)

133,518,341

6,063,325

The prosecutors in case No. 218 assign nine reasons in support of their contention in the premises; namely, that the assessments and taxes levied upon their property are excessive, erroneous, unlawful, and unconstitutional. Epitomized, these claims, as pointed out in the opinion of the state board of tax appeals, are reduced to three distinct issues, namely: (1) The method by which the assessments were made is illegal; (2) regardless of the method of assessment, the franchises and railroad property have been assessed in excess of true value; and (3) that the great mass of real estate taxable under the General Tax Act is assessed at less than true value, and that properties of railroad companies, being assessed at true value, are thereby discriminated against.

Prosecutors, in case No. 218, in their oral argument, as well as on their briefs, further reduce the issues to two questions: "First, with respect to the ascertainment of the true value of property used for railroad purposes; and, second, with respect to the equality of the assessments levied on railroad property and other property."

Prosecutors, in case No. 236, including the Reading group (four writs), the Lehigh & Hudson River Railway Company (one writ), and the Raritan River Railroad Company (one writ), although they assigned six reasons in support of their contention that the assessments and taxes levied upon their properties are also excessive, erroneous, unlawful, and unconstitutional, disclaim any attack upon the method employed in the making of the assessments; offered no proof thereon; and limited their attack to that of illegal discrimination. It was stipulated that all testimony and proofs, by both sides, should apply to the companies in case No. 236, solely on the question of discrimination.

After 20 full court days, held between September 19 and November 3, 1933, the board, on December 15, 1933, reached the following conclusions :

(a) It unanimously sustained the method employed in the making of the assessment.

(b) It decided, by a vote of 3 to 2, that there was no illegal discrimination. On this point, however, let it be marked, the president of the board, Mr. Weaver, said: "I dissent from the majority opinion that there is no illegal discrimination. I believe that there is conclusive evidence of under-valuation of the real property assessed under the General Tax Act, as of October 1, 1932, in all taxing districts of the State, with few exceptions, where proof was offered."

"Following Soper et al. v. Conly et al., 108 N. J. Eq. 370, 154 A. 852, while my knowledge is not evidence, nor can I take judicial notice of those facts within my knowledge, yet that knowledge enables me to discriminate and properly value the divergence of testimony between the experts. This knowledge enables me to differentiate the testimony of the experts and properly qualifies me to determine which of the testimony has greater value."

"However, J am unable from the testimony offered to satisfactorily conclude the average amount of under-valuation throughout the entire state, nor can I in the same way determine the average amount of under-valuation in the several taxing districts of the state where the railroads hold second class property. Mr. Compton shares in these views." (Italics ours.)

(c) It sustained the valuation as to first, second, and third class property.

(d) It sustained the franchise valuation.

As to the Method. The assessments in the instant cases were made pursuant to P. L. 1888, p. 269 (4 Comp. St. 1910, p. 5260 et seq., § 445 et seq.), as further supplemented and amended. Section 3 of the Railroad Tax Act (4 Comp. St. 1910, p. 5264, § 447), in its present state, requires the true Value of all property used for railroad purposes, including franchises, be made under the following for classifications: (1) The main stem, and structures thereon; (2) the lands outside the main stem, with the structures thereon; (3) the tangible personal property (rolling stock, machinery, etc.); and (4) the remaining property, including the franchises.

The proof is clear that the provisions of the statute have been observed. Mr. Louis Focht, a civil engineer since 1884, has been identified with the branch of the state department in charge of the detail work incident to the making of the assessments since 1898; he is the chief engineer of the division of railroad valuation and taxes; he was formerly employed by the Lehigh Valley Railroad Company of New Jersey for about sixteen years as a division engineer; and he has walked every foot of railroad in this state. He was called and testified as a witness for the prosecutors and respondents. He said that the method employed in the making of the instant assessments, and herein complained of, is the method that has been employed in this state since 1884. This is the first time that an attack has been centered and directed against it.

The problem of railroad taxation is not unlike all other problems of taxation; it is a troublesome one. This is so in normal times; and it is especially so during these present economic disturbances and the period of extraordinary transportation problems through which railroads are now passing. The contest between the taxing authorities of the state and the prosecutors has been a continuous one; the end thereof is not made to appear.

Thus, notwithstanding that this contest has been waging for almost fifty years, and that almost every possible phase of this litigious question has been brought to our courts (it is estimated that it has been so brought in excess of 100 times) and received their consideration, it is not at all surprising that the prosecutors should, at this late stage of the contest, challenge the method employed and so firmly established in the making of these assessments.

In support of this attack, prosecutors strongly argue that the excision of the word "separately" from section 3 of the act of 1888, (P. L. p. 270), as it appeared in the act of 1884 (P. L. p. 143), and other changes in the fourth subdivision thereof, is a clear indication, heretofore "generally overlooked," on the part of the Legislature, "to correct the irrational direction to separate a railroad into classes for the purpose of valuation." And it is argued that the effect of the act as amended in 1888 "is to require the whole railroad to be valued as a whole and as a railroad, and the proportionate value of (the) four general elements then ascertained for the purpose of distributing the tax."

The legislative mandate as to the distribution of taxes levied on second class property (P. L. 1918, pp. 1078, 1081 [Comp. St. Supp. 1924, § 208—447j]; and its supplements and amendments thereto) is a very persuasive factor in support of the method or procedure followed. And it would seem to us that it is far from a satisfactory answer thereto to say that, if and when the taxes levied, on the method proposed, and hereinafter referred to, by prosecutors, are paid, there can be a division of those taxes on some arbitrary percentage basis, to meet and comply with the legislative...