Central R. Co. of New Jersey v. Martin

• Decision Date: 05 April 1933
• Citation: 3 F. Supp. 477
• Parties: CENTRAL R. CO. OF NEW JERSEY v. MARTIN, State Tax Commissioner, et al. LEHIGH VALLEY R. CO. OF NEW JERSEY v. SAME.
• Court: U.S. District Court — District of New Jersey

3 F. Supp. 477

CENTRAL R. CO. OF NEW JERSEY v. MARTIN, State Tax Commissioner, et al.^*

LEHIGH VALLEY R. CO. OF NEW JERSEY v. SAME.

District Court, D. New Jersey.

April 5, 1933.

Maximillian M. Stallman, of Newark, N. J., Robert J. Bain, of Jersey City, N. J., and Alexander H. Elder and Jervis Langdon, Jr., both of New York City, for plaintiffs.

William A. Stevens, Atty. Gen. (Duane E. Minard, of Newark, N. J., Edward P. Stout, of Jersey City, N. J., and John Solon, of counsel), for defendants.

CLARK, District Judge.

The principal case seems to present a problem in method. It is agreed that for many years the taxing authorities of New Jersey have indulged in the amiable practice of assessing railroad property at 100 per cent. and the property of all its other citizens (sic) at 80 per cent., perhaps an ancient application of the now so popular capacity to pay principle. It is also agreed that this form of assessment presents an issue under the Federal Constitution. It follows, of course, that its ultimate resolvement rests with the United States Supreme Court, and this, too, is conceded.

At this point the litigants part company. The railroads insist that this important question should first be considered by the inferior United States courts. They have filed their bill before us as the first step in this process. The state, on the other hand, is convinced that the inevitable appeal to the United States Supreme Court should come only after the intermediate and highest courts of New Jersey have refused relief.

At first blush, this difference seems, like Mr. Wilson's famous comparison of the two political parties in New Jersey, a mere matter of Tweedledum and Tweedledee, and therefore not worth any intellectual strain upon honorable courts. One might suppose that the selection of a forum should be left to caprice rather than to contest. That it is not so left is attested by an impressive body of authority in the United States courts. We find aggrieved corporations continually seeking our courts and being met as often by the plea that they should first exhaust their remedies in the state courts.

At the outset we find a rather puzzling situation disclosed by the decisions of the United States Supreme Court. There have been, as we have indicated, many bills to enjoin state administrative bodies filed in the United States courts. In fact, regulation and injunction have become like night and day. In our very humble judgment, the highest court got off on the wrong foot in its consideration of the first of these cases. In the famous case of Smyth v. Ames, 169 U. S. 466, 516, 18 S. Ct. 418, 42 L. Ed. 819 (1897), the court turned a deaf ear to the plea that the concurrent jurisdiction of equity was improperly invoked. It appeared that the regulating statute of Nebraska, which fixed the rates objected to, provided for an appeal to the Supreme Court of the state, if the rates fixed were unreasonable and unjust. This the court found irrelevant. It was the court's opinion that the remedy whose adequacy was required by ancient doctrine must be in the United States court.

This seems to us a misconception of a fundamental of equity jurisprudence. The Chancery Court owes its very origin to the failure of the common-law courts to redress individual wrongs. It was the individual injustice that moved the king's conscience. Obviously, it can be of little concern to the individual that he obtains relief in one court rather than another. Relief is what he is after, and who pays the judge's salary may be interesting, but is surely unimportant. So equally we submit it is unimportant in its bearing upon the adequacy of the remedy. A dual court system is a fact just like any other fact bearing upon the situation of the litigant seeking equitable redress. Just like, for instance, the facts showing a continuing trespass.

It may be that the necessity for a decision on the constitutional question obscured the apparently minor question of procedure. At any rate, the later decisions of the Supreme Court indicate a realization of error, although they do not expressly overrule. The complainant cites a group of four cases. They are all contained in the last cited, and each earlier one cites, as seems to be customary, the ones preceding it and no others. The earliest is, of course, Smyth v. Ames, already discussed. The next case, Chicago, B. & Q. R. Co. v. Osborne, 265 U. S. 14, 44 S. Ct. 431, 68 L. Ed. 878 (decided twenty-six years later), repeats the bald rule, but promptly indicates the real reason for granting relief: "That however is not the only objection. On a writ of error the Court is confined to the record. The most that it could do, it would seem, would be, if errors appeared on the face of the record, to set aside an excessive valuation and remit the matter to the same Board to try again, which is hardly satisfactory, if the Board is seeking to evade the law." Page 16 of 265 U. S., 44 S. Ct. 431.

The next case (two years later again) Risty et al. v. Chicago, Rock Island & Pacific Railway Co., 270 U. S. 378, 388, 46 S. Ct. 236, 240, 70 L. Ed. 641, prefaces its statement of the rule by the significant sentence: "The remedy by appeal to the state court under section 8469 does not appear to be coextensive with the relief which equity may give."

And finally the last case, Henrietta Mills v. Rutherford County, 281 U. S. 121, 50 S. Ct. 270, 74 L. Ed. 737 (1929), although it also states the rule, need not have done so. There was in fact a remedy on the law side of the federal court.

This last unusual circumstance really illuminates the whole fallacy. In the ordinary tax or rate case, the remedy at law is in the nature of things a matter of state procedure, state courts, and state statutes. If the rule is valid, relief can be denied by a simple statement to that effect. That is just what the cases do not do. They all discuss at more or less length the degree of adequacy of a remedy (in the state courts) which, by their own showing, is irrelevant. We find such discussion in Union Pacific R. Co. v. Board of Com'rs of Weld County, 247 U. S. 282, 38 S. Ct. 510, 62 L. Ed. 1110; Risty v. Chicago, Rock Island & Pacific Railway Co., above cited; and Atlantic Coast Line R. Co. v. Doughton, 262 U. S. 413, 426, 43 S. Ct. 620, 67 L. Ed. 1051.

In any event, and perhaps to avoid their own limitation, the Supreme Court has evoked another principle to prevent the inferior United States courts from scooping the state courts. This principle might be described rather as one of diplomacy than of technical law. It is clearly disorderly to have the national courts poking their injunctions into the administrative processes of sovereign states without giving the courts of those states an opportunity to discipline their own family, if discipline is needed. This diplomacy among judicial bodies is called comity, and was first applied to our particular problem in the case of Prentis v. Atlantic Coast Line Co., 211 U. S. 210, 29 S. Ct. 67, 53 L. Ed. 150, where the bill was suspended to await the result of an appeal to the Virginia Court of Appeals.

As we study the application of this comity by the Supreme Court, we discover that we have just come around the barn. In other words, comity requires the federal courts to refrain if the remedy in the state courts is adequate and not otherwise. Pacific Telephone & Telegraph Co. v. Kuykendall, 265 U. S. 196, 44 S. Ct. 553, 68 L. Ed. 975; Railroad and Warehouse Commission of Minn. v. Duluth Street Railway Co., 273 U. S. 625, 47 S. Ct. 489, 71 L. Ed. 807; Oklahoma Natural Gas Co. v. Russell et al., 261 U. S. 290, 43 S. Ct. 353, 67 L. Ed. 659. Our courts must be polite only to effective state courts — those worthy of such courtesy, because of their protection of litigants who have a dual citizenship.

The practice of discriminatory assessment, according to the cases, was an early discovery of the taxing authorities. The Supreme Court of the United States in a case decided in 1879 utters this explanation thereof, in the same breath wherein it prevents it in the particular instance. Justice Miller, speaking for the court in the case of Cummings v. Merchants' National Bank, 101 U. S. 153, at page 162, 25 L. Ed. 903, said: "It is proper to say, in extenuation of the rule of primary valuation of different species of property developed in this record, that it is not limited to the State of Ohio, or to part of it. * * * If we look for the reason for this common consent to substitute a custom for the positive rule of the statute, it will probably be found in the difficulty of subjecting personal property, and especially invested capital, to the inspection of the assessor and the grasp of the collector. The effort of the land-owner, whose property lies open to view, which can be subjected to the lien of a tax not to be escaped by removal, or hiding, to produce something like actual equality of burden by an undervaluation of his land, has led to this result. But whatever may be its cause, when it is recognized as the source of manifest injustice to a large class of property around which the Constitution of the State has thrown the protection of uniformity of taxation and equality of burden, the rule must be held void, and the injustice produced under it must be remedied so far as the judicial power can give remedy."

In the case from which we have just quoted, the United States courts (Circuit and Supreme) had jurisdiction under the laws of the United States (the complainant being a national bank), and was able accordingly to apply the Constitution of Ohio. They decided (incidentally with the Chief Justice dissenting) that the word "uniform" in that instrument (article 12, § 2) controlled the phrase "according to its true value." They accordingly enjoined an assessment of bank shares by the board of equalization for banks and railroad companies at a value fully equal to their selling price when the state board of equalization...