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

• Decision Date: 13 May 1941
• Citation: 19 N.J.Misc. 427,20 A.2d 330
• Parties: CENTRAL R. OF NEW JERSEY et al. v. MARTIN, State Tax Commissioner.
• Court: New Jersey Supreme Court

20 A.2d 330

19 N.J.Misc. 427

CENTRAL R. OF NEW JERSEY et al.

v. MARTIN, State Tax Commissioner.

New Jersey State Board of Tax Appeals.

May 13, 1941.

Syllabus by the Board.

1. The petitions of appeal filed by the major railroad systems with the state board of tax appeals against the assessments upon railroad property made by the State Tax Commissioner for the years 1937 and 1938, raise the same legal issues as were decided against the railroads both in the state and federal courts upon prior appeals. The petitioners are therefore concluded under the doctrine of res judicata from questioning either the legality of the methods of assessment used by the Commissioner, or the constitutionality of the assessments.

2. One of the issues upon which petitioners are concluded is that of the making of assessments without material reflection of declining revenues. A new issue is not created by the offer of witnesses who state personal theories as to the valuation of railroad property, such testimony constituting, at most, additional evidence in opposition to established assessment methods in use in this state, and previously approved as valid by the courts of the state.

3. The railroad tax statutes of this state vest an authoritative status in the personal knowledge and judgment of the State Tax Commissioner in the valuation of railroad property, which is not to be superseded by the judgment of professional valuation experts offered as witnesses by appealing railroad companies.

4. The practise of the State Tax Commissioner, in considering the cost of grade crossing eliminations and other work done in fitting lands for use for railroad purposes, as elements in the valuation of railroad property, is lawful.

5. Certain floating equipment assessed to the Delaware, Lackawanna, and Western Railroad held properly included in the assessment of the railroad property of said company, the presumption of its having a taxable situs in New Jersey not being overcome by any proof offered by the railroad.

Proceeding in the matter of the appeals by the Central Railroad of New Jersey and others from assessments made by J. H. Thayer Martin, State Tax Commissioner, on railroad properties for the years 1937 and 1938.

All assessments except one affirmed.

Maximilian M. Stallman, of Newark, and Robert J. Bain, of Jersey City, for petitioners.

David T. Wilentz, Atty. Gen, and Duane E. Minard and Charles V. Webb, Jr, both of Newark, for respondents.

QUINN, President.

The appeals represented in the foregoing caption are brought on behalf of the railroad systems named, and of the separately assessed individual companies, aggregating sixty-six in number, which they operate through stock control, lease, or otherwise. The assessments sought to be reviewed were made by respondent upon the railroad properties operated in this state by those systems, for the tax years 1937 and 1938, determined as of the assessing dates fixed in the controlling statutes, January 1, 1936, and January 1, 1937, respectively. P.L. 1888, Ch. 208, as supplemented and amended, R.S. Sec. 54:19-1 et seq, through Sec. 54:29-7, N.J.S.A. 54:19-1 et seq.

The major contentions of the railroads are (1) that the valuations and assessments were made arbitrarily and are greatly in excess of the true value of the properties, and therefore are in violation of the Constitution and laws of New Jersey (which provide that property shall be assessed for taxes according to its true value), and deprive the companies of their property without due process of law, in violation of the Fourteenth Amendment of the Constitution of the United States; and (2) that the valuations and assessments were made at a relatively higher ratio to the true values of the properties of the companies than the ratio to true value at which the properties of other taxpayers generally throughout the state were assessed for taxes for the same years, and therefore that the assessments of the companies' properties are in violation of Article IV, Section VII, paragraph 12 of the Constitution of New Jersey, N.J.S.A, which provides that property shall be assessed for taxes under general laws and by uniform rules according to its true value, and deny the companies the equal protection of the law, in violation of the Fourteenth Amendment of the Constitution of the United States.

Subsidiary questions are raised with respect to the validity of certain practises of the State Tax Department in the mechanics of valuation, primarily as to the following: (a) the determination of the value of land in railroad use by the criterion of the value of adjacent lands not used for railroad purposes; (b) in determining the value of lands by first fixing their value as ordinary lands not fitted or conditioned for railroad use, and then adding thereto elements of cost involved in such conditioning, such as grading, clearing, erection of retaining walls, etc.; (c) in valuing and assessing as railroad property structures designed to protect the travelling public at grade crossings, such as overhead bridges, abutments, gates and signs; (d) the valuation and assessment, as against the Delaware, Lackawanna and Western Railroad Company, of active floating equipment of that company, claimed by it not to have a situs for taxation in this state.

Although the statutory scheme for the assessment of railroad property in this state has been the subject of frequent exposition in prior judicial opinions disposing of appeals for prior years by these companies in both the state and federal courts, as well as by this board, it becomes advisable briefly to review the relevant statutes, in view of the contention here urged by the railroads to the effect that the essential issues are not concluded by earlier adjudications, because of the presentation of expert testimony in these cases as to railroad true value, and as to the correct method for its determination.

Under Section 3 of the Act, P.L. 1888, Ch. 208, p. 270; C.S. p. 5264, R.S. § 54:22-1, N.J.S.A. 54:22-1, the State Tax Commissioner is directed to ascertain the true value of all property used for railroad purposes, including franchises. No specific directions are provided by the statute as guiding criteria for use by the Commissioner in arriving at such true value, but he is directed expressly to ascertain:

I. The length and value of the main stem of each railroad.

II. The value of the other real estate used for railroad purposes in each taxing district, including the roadbed (other than main stem) waterways, reservoirs, tracks, buildings, water tanks, waterworks, riparian rights, docks, wharves and piers, and all other real estate, except lands not used for railroad purposes.

III. The value of all the tangible personal property of each railroad.

IV. The value of the remaining property, including the franchise.

The Commissioner is further directed to serve upon each company a statement of the assessed valuation of the property of such company in the state, and of the separate valuation of the property of such company in each taxing district.

To aid him in performing his statutory function of fixing the true values of the four classes of property created by the act, the roads are required, annually, to make returns of statements or schedules, showing:

(a) The real estate, specifying its extent and dimensions, setting out in detail the total length of the road including branch and leased lines, the entire length in this state, and the length of double or side tracks, designating the length and value of the main stem of each railroad, and of the waterway of each canal, and the length of such main stem and waterway in each taxing district, and the width wherever it exceeds one hundred feet, and designating particularly any portion in each taxing district which is not used for railroad purposes and which is locally assessed and taxed, and the value thereof;

(b) The real estate and number, character and value of all buildings and structures in each county and taxing district used for railroad or canal purposes, including the roadbed (other than main stem), waterways, reservoirs, tracks, buildings, water tanks, waterworks, riparian rights, docks, wharves and piers, and being the property referred to in subdivision II of Section 54:22-1 of this title;

(c) The character and value of all the tangible personal property used by it for railroad and canal purposes;

(d) The amount of capital stock authorized and the number of shares into which such capital stock is divided. P.L. 1905, Ch. 91, Section 1, R.S. Sec. 54:23-1, N.J.S.A. 54:23-1.

These statements are required to be made on forms prescribed by the Commissioner. Such reports have not been filed by the petitioners for the years in question.

The act provides for a full and detailed procedure for the hearing and review by the Commissioner of any complaints by any railroad company with respect to assessments of railroad property made by him, and in the course of such review, it is specifically provided that he "shall be entitled to use his personal knowledge and judgment as to the value of property." (Italics supplied.) P.L.1888, Ch. 208, Sec. 12, p. 276, as amended by P.L. 1933, Ch. 11, Sec. 1, p. 23 and P.L. 1933, Ch. 305, Sec. 1, p. 819, N.J.S.A. 54:26-4.

In the instant cases all of the petitioners availed themselves of the right of preliminary review, and these appeals are from the Commissioner's final determinations.

Although the hearings in these matters resulted in the accumulation of a stenographic record of 4,610 pages of testimony, and the production of some 450 separate exhibits, a careful review of the cases in their entirety elicits one major and decisive issue: Have petitioners overcome the presumption of correctness which must be deemed to attend the valuations made by the State Tax Commissioner, as assessor, particularly in the light of the prior tax litigation maintained by these railroad companies since 1933?

The underlying...