Chicago & N.W. Ry. Co. v. Eveland

• Decision Date: 03 April 1922
• Docket Number: 107.
• Citation: 285 F. 425
• Parties: CHICAGO & N.W. RY. CO. v. EVELAND et al.
• Court: U.S. District Court — District of South Dakota

285 F. 425

CHICAGO & N.W. RY. CO. v. EVELAND et al.

No. 107.

United States District Court, D. South Dakota, Southern Division.

April 3, 1922

F. W Sargent, of Chicago, Ill., and A. K. Gardner, of Huron, S.D for plaintiff.

Byron S. Payne, Atty. Gen., and V. R. Sickel, Asst. Atty. Gen., for defendants.

ELLIOTT District Judge (in memorandum).

In Chicago & Northwestern Railway Company, Plaintiff, v. H. L Eveland, Hugh Smith, and H. C. Preston, Constituting the Tax Commission of the State of South Dakota et al., Defendants, I have determined to deny the motion of the defendants to dismiss the bill of complaint. In this motion counsel for defendants contend that this court is without jurisdiction assuming that there is an adequate remedy at law. On the other hand, counsel for plaintiff urges that there is no adequate remedy at law, and further that a multiplicity of suits would result, and that federal questions are involved. The diversity of citizenship of plaintiff and defendants is conceded, the plaintiff being a nonresident railway corporation and the defendants residents and officers of the state of South Dakota, and of different counties in the state, as set forth in the bill of complaint. It is conceded that more than $3,000, exclusive of interest and costs, is involved. It further appears by the allegations of the bill that the railway of the plaintiff, the assessment of which is complained of, is operated into and through 35 different counties of the state of South Dakota, and that different defendants are officers of these counties, respectively; that, if plaintiff has a remedy at law, it depends upon the payment of the tax under protest, and a suit in each of the various counties of the state where payments are made for the recovery of the amount alleged to be paid unjustly.

The bill contains further proper allegations as to the method in which it is alleged taxes were levied upon the property of the plaintiff, and charges that the tax commission willfully and fraudulently disregarded the report required by law to be made by the plaintiff to the commission, and the protests and objection of the plaintiff, and--

'willfully and fraudulently disregarded the true and actual value of the property of the plaintiff in the state of South Dakota, and willfully, knowingly, fraudulently, and arbitrarily added to the physical and actual value thereof a fictitious and arbitrary sum or amount on account of the franchises, rights, and privileges granted the said plaintiff under the laws of the state of South Dakota, well knowing that the exercise and use of said alleged franchises, rights, and privileges by the plaintiff, have and will continue to result, not in profit or value to the plaintiff, but in loss and damage to it, and said commission arbitrarily and in violation of section 17, article 6, of the Constitution of South Dakota, which provides that all taxation shall be equal and uniform, and in violation of section 2, article 11, of the Constitution of South Dakota, which provides that the valuation of property for taxation purposes shall never exceed the actual value thereof, and in violation of section 2 of article 6 of the Constitution of South Dakota, which provides that no person shall be deprived of life, liberty, or property without due process of law, and in violation of the Fourteenth Amendment to the Constitution of the United States, which provides that no one shall be deprived of life, liberty, or property without due process of law, and that no one shall be denied the equal protection of the law,' said commission 'has made the said unjust, excessive, and inequitable assessment of plaintiff's said property, which plaintiff alleges is fraudulent, unconstitutional, and void, and will result in an enormous disparity between the various assessments of property within said state, and is and will be confiscatory.'

The diversity of citizenship, the amount in controversy, together with the fact that it affirmatively appears that, under the circumstances alleged in the bill, the alleged wrong complained of by the plaintiff is of such a character that plaintiff's remedy at law is inadequate, in that it appears from the bill that, if the assessment made by the defendants is allowed to be certified down to and extended by the various counties and cities who are to collect the tax, the plaintiff, in order to avail itself of its rights in suits at law, would be required to bring suits in each county, making 35 in all. Under these circumstances, in an opinion rendered by the present Chief Justice in Taylor v. L. & N. Ry. Co., 88 F. 350, 31 C.C.A. 537, Judge Taft said:

'Courts of equity frequently interfere to prevent a multiplicity of suits at law. It is a well-recognized head of equity jurisdiction. * * * In many cases in which the question of equity jurisdiction to enjoin a tax is considered by the Supreme Court of the United States, the prevention of a multiplicity of suits is specifically mentioned as a sufficient reason for its exercise.'

I am of the opinion, also, that unquestionably the law is that the 'adequate remedy at law,' which is the test of equitable jurisdiction in the federal courts, must exist in those courts, and counsel for defendants do not urge a remedy at law in behalf of the plaintiff in this court.

Upon the face of the bill there is the claim of the plaintiff, supported by proper allegations, that the assessment of the property of the plaintiff, complained of in the bill, violates the Fourteenth Amendment of the Federal Constitution, in that it denies the equal protection of the laws, and that by the manner in which this assessment has been made plaintiff has been deprived of its property without due process of law. If there were no diversity of citizenship, this issue would give this court jurisdiction. L. & N. Ry. Co. v. Bosworth (D.C.) 209 F. 403.

Unquestionably, the allegations of the bill present a real and substantial controversy under the Constitution of the United States, involving more than $3,000 exclusive of interest and costs, and therefore this case is cognizable in this court. It has recently been held by the Supreme Court of the United States that:

'In such a case the jurisdiction of that court, and ours in reviewing its action, extends to every question involved, whether of federal or state law, and enables the court to rest its judgment or decree on the decision of such of the questions as in its opinion effectively disposes of the case. ' Davis, Director General of Railroads, et al. v. Wallace et al., 257 U.S. 478, 42 Sup.Ct. 164, 66 L.Ed. 325 (opinion dated January 9, 1922).

The plaintiff in this action, seeking an injunction, having offered to pay the taxes confessedly due, and offered to pay such amount as the court might find to be justly and equitably due, is entitled to maintain this action in this jurisdiction. Keokuk & Hamilton Bridge Co. v. Salm et al., 258 U.S. 122, 42 Sup.Ct. 207, 66 L.E. . . . (opinion dated February 27, 1922). It is ordered that the motion to dismiss be and is denied, with an exception to the defendants.

When it comes to a determination of the issues presented upon the merits, fortunately there is little dispute between the parties plaintiff and defendant, or counsel for the respective parties, as to the law that must necessarily guide the determination of the issues presented. Counsel for both plaintiff and defendant, each placing particular emphasis upon different elements that should enter into consideration in fixing the value of plaintiff's property for taxation, agree upon the proposition that:

'Equity will not relieve against an assessment merely because it happens to be at a higher rate than that of other property; that such inequalities, due to mistake, to the fallibility of human judgment, or to other accidental causes, must be borne, for the reason that absolute uniformity cannot be obtained; that, in other words, what may be called sporadic cases of discrimination cannot be remedied by the chancellor. He can only interfere when it is made clear that there is, with respect to certain species of property, systematic, intentional, and unlawful undervaluation for taxation by the taxing officers, which necessarily effect an unjust discrimination against the species of property of which the complainant is an owner.'

Counsel for plaintiff, recognizing this rule, alleges a systematic, intentional, and unlawful undervaluation for taxation by the taxing officers of the agricultural land in the state of South Dakota, and alleges that this undervaluation of the agricultural land in the state necessarily effects an unjust discrimination against the railway property of the plaintiff. This, together with the further proposition urged by the plaintiff, that its railway property was knowingly, willfully, and arbitrarily overvalued, constitutes the real cause of complaint by the plaintiff. The plaintiff, of course, urges that this action on the part of the tax commission has been systematically pursued, and that such acts of the commission are in violation of the Fourteenth Amendment of the Constitution of the United States, in that the enforcement of this tax, thus arbitrarily levied, will result in a denial of the equal protection of the law to the plaintiff, and will also result in the taking of plaintiff's property without due process of law.

As a basis for the alleged discrimination in the valuation of the property of the plaintiff as compared with other property in the state, the largest item of taxable property, to wit agricultural lands within the state, is taken by the plaintiff, and it is alleged that the farm lands in the state of South Dakota were assessed and equalized by the tax commission for the year 1921, the...