CHICAGO, M., ST. P. & PR CO. v. Adams County

• Citation: 72 F.2d 816
• Decision Date: 31 August 1934
• Docket Number: No. 7122.,7122.
• Parties: CHICAGO, M., ST. P. & P. R. CO. v. ADAMS COUNTY et al.
• Court: U.S. Court of Appeals — Ninth Circuit

72 F.2d 816 (1934)

CHICAGO, M., ST. P. & P. R. CO. v. ADAMS COUNTY et al.

No. 7122.

Circuit Court of Appeals, Ninth Circuit.

August 31, 1934.

F. M. Dudley, of Seattle, Wash. (C. S. Jefferson, of Chicago, Ill., and O. G. Edwards and A. J. Laughon, both of Seattle, Wash., of counsel), for appellants and cross-appellees.

G. W. Hamilton and R. G. Sharpe, both of Olympia, Wash., for appellees and cross-appellants.

U. S. Webb, Atty. Gen., and H. H. Linney, Deputy Atty. Gen., amici curiæ.

Before WILBUR and SAWTELLE, Circuit Judges, and ST. SURE, District Judge.

SAWTELLE, Circuit Judge.

Consolidated for trial in the court below, the present suits were brought by the appellant and cross-appellee for the purpose of having the court set aside the assessments of the railroad's operating real properties in the state of Washington, as well as the taxes based thereon, for the years 1926 and 1927. The assessments were made by the state tax commission and were affirmed by the state board of equalization.

The appellant alleges that the assessments were made arbitrarily, capriciously, and fraudulently, upon erroneous theories, and were grossly excessive, and that the taxes based thereon are consequently illegal and excessive. It is charged that the making of such assessments denied to the appellant and its predecessors in interest the equal protection of the laws, and that the enforcement of the taxes will deprive the appellant of its property without due process of law, in violation of the Fourteenth Amendment of the Constitution of the United States.

Two suits were filed by the appellant or its predecessors — one involving the taxes for 1926, and the other dealing with the taxes for 1927.

In the first suit, twenty counties of the state of Washington, and in the second suit, nineteen counties of the same state, were named parties defendant. The counties, as such, were the sole defendants; no county officers or other individuals were joined.

The complaint in the suit involving the 1926 taxes was filed in March, 1927. At that time the railway properties belonged to the Chicago, Milwaukee & St. Paul Railway Company, but were in the custody of receivers appointed in actions brought for the foreclosure of mortgages on properties of that company, and for other purposes. In January, 1928, pursuant to decrees in the foreclosure suits, the properties were conveyed to the Chicago, Milwaukee, St. Paul & Pacific Railroad Company. In June of the same year the latter company was substituted for the receivers of the earlier company as complainant in the tax suit. The complaint in the suit involving the 1927 taxes was filed in March, 1928.

The complaints in these actions were filed prior to the dates when the taxes therein referred to became delinquent; and subsequently to the filing of the complaints, but before the taxes became delinquent, the taxes extended against the operating personal properties were paid in full, and one-half of those extended against the operating real properties were paid. The payments upon the real properties were made under protest, as to an alleged excess. As we have already stated, we are here concerned only with the assessments and taxes on the appellant's operating real properties. The proceedings as to these payments were set up by supplemental complaints.

The suit involving the 1926 taxes and that dealing with the taxes for 1927 were consolidated and referred to the same master. On March 29, 1930, the master filed his report. There had also been referred to him, in addition to the suits brought by the appellant, a similar action instituted by the Northern Pacific Railway Company and one brought on behalf of the Spokane, Portland & Seattle Railway Company; and the master included his conclusions and findings in all of those actions in a single report. Numerous exceptions to the master's report were filed.

At the same time that the present Milwaukee cases were argued, the similar actions by the Northern Pacific and the Spokane Company, already referred to, were heard. On July 9, 1932, the court below filed a single opinion in those various cases. Northern Pac. Ry. Co. v. Adams County, 1 F.Supp. 163. On September 7, 1932, findings of fact and conclusions of law were filed, conforming to the opinion; and, after the appellant had filed exceptions thereto, the final decree was entered, from which decree the present appeals have been taken. The appellees' exceptions to the court's findings and conclusions were filed on the day after the decree was entered.

The court's final decree set forth that the operating real properties of the appellant had been "arbitrarily, wrongfully and excessively assessed," and contained tables showing the balances of taxes due, as determined by the District Judge. The appellant was ordered to pay the respective appellees the balances listed in the decree. Upon the appellant's making the designated payment to each respective county, then, in the language of the decree, "such county and its officers, shall, and it and they are hereby required to, cancel upon the books of such county the valuation of the operating real properties of said Milwaukee Company as extended thereon, for the year or years for which such payment or payments may be made; and to cancel the taxes extended against or upon such operating real properties for said year, as the same now appear upon said books; and thereafter such county, its officers and representatives, shall forever refrain from asserting, or attempting to assert, any claim for or on account of any taxes against or upon such operating real properties, upon or under any tax levy, for the said year or years for which such payment shall have been made as aforesaid." (Italics our own.)

It will be seen that, though no county officers or representatives had been joined as parties defendant to either suit, the decree attempted to include such officers and representatives in both its mandatory and its inhibitory orders.

The appellees and cross-appellants contend that there is a fatal defect of parties defendant, in that the county treasurers have not been joined. It is urged that the county officers "were not only necessary but indispensable parties to these suits."

The appellant, on the other hand, replies that the appellees have waived all objections on this ground. Nevertheless, the appellant concedes "that if the county treasurers are indispensable parties, the counties cannot waive the requirements that they be joined as defendants; and the court will refuse relief upon its own motion regardless of the acts or agreements of the parties to the suit." That, as we shall presently see, is unquestionably the law.

Since we are confining our present inquiry solely to the question of whether or not the county treasurers are indispensable parties — as contradistinguished from "necessary," "proper," or "formal" parties — it will be unnecessary to examine the facts relied upon to establish the appellees' alleged waiver of objections as to defect of parties.

In the first place, it must be remembered that, on the question of indispensability of parties, a federal court of equity must be governed primarily by federal, rather than by state, rules.

In Equitable Trust Co. of New York v. Denney (C. C. A. 7) 24 F.(2d) 169, 170, the court said: "The peculiar and limited jurisdiction of the federal courts, affected as it is by the citizenship of the parties, has resulted in a well-recognized modification of the former rules in chancery practice classifying parties as proper or necessary."

Again, in Michigan Bell Telephone Co. v. Odell (D. C.) 45 F.(2d) 180, 182, the following language was used: "We agree with the master that it is fundamental that a state statute restricting the right to maintain suits in its courts is not applicable to or binding upon a federal equity court, and that no state procedure can affect a substantive federal right."

And in Lane v. Equitable Trust Co. of New York (C. C. A. 8) 262 F. 918, 926, certiorari denied, 252 U. S. 578, 40 S. Ct. 344, 64 L. Ed. 725: "The next point urged by appellant is that section 2859 of the Revised Statutes of Missouri of 1909 Mo. St. Ann. § 3095, p. 1918 provides that a foreign corporation or individual trustee cannot foreclose a deed of trust covering property in that state without joining a resident trustee as a party plaintiff. That requirement of the statute of Missouri cannot control the bringing of a suit in a United States court in that state by a foreign corporation. Many cases cited." See, also, Rogers v. Penobscot Mining Co. (C. C. A. 8) 154 F. 606, 615, 616; O'Neil v. Wolcott Mining Co. (C. C. A. 8) 174 F. 527, 535, 536, 27 L. R. A. (N. S.) 200; Camp v. Bonsal (C. C. A. 4) 203 F. 913, 917, 918; Jennings v. United States (C. C. A. 8) 264 F. 399, 404; Fienup v. Kleinman (C. C. A. 8) 5 F.(2d) 137, 140; Franz v. Buder (C. C. A. 8) 11 F.(2d) 854, 856, 857.

An early and able discussion of the entire question of indispensable parties is to be found in the following oft-quoted passage from the opinion of Mr. Justice Curtis in Shields v. Barrow, 17 How. (58 U. S.) 130, 139, 15 L. Ed. 158. After quoting from Russell v. Clarke's Executors, 7 Cranch, 98, 3 L. Ed. 271, the learned jurist continued: "The court here points out three classes of parties to a bill of equity. They are: 1. Formal parties. 2. Persons having an interest in the controversy, and who ought to be made parties, in order that the court may act on that rule which requires it to decide on, and finally determine the entire controversy, and do complete justice, by adjusting all the rights involved in it. These persons are commonly termed necessary parties; but if their interests are separable from those of the parties before the court, so that the court can proceed to a decree, and do complete and final justice, without affecting other persons not before the court, the latter are not indispensable parties. 3. Persons who not only...