Chicago Union Traction Co. v. State Bd. of Equalization

• Decision Date: 04 April 1902
• Citation: 114 F. 557
• Parties: CHICAGO UNION TRACTION CO. v. STATE BOARD OF EQUALIZATION et al. CHICAGO CONSOL. TRACTION CO. v. SAME. (Circuit Court, N.D. Illinois, N.D. SOUTH CHICAGO CITY RY. CO. v. BAIRD, et al., County Collectors. CHICAGO EDISON CO. v. RAYMOND et al., County Collectors. CHICAGO CITY RY. CO. v. SAME. PEOPLE'S GAS LIGHT & COKE CO. v. SAME. CHICAGO TEL. CO. v. SAME.
• Court: U.S. District Court — Southern District of Illinois

114 F. 557

CHICAGO UNION TRACTION CO. v. STATE BOARD OF EQUALIZATION et al. CHICAGO CONSOL. TRACTION CO. v. SAME.

(Circuit Court, N.D. Illinois, N.D.

SOUTH CHICAGO CITY RY. CO. v. BAIRD, et al., County Collectors.

CHICAGO EDISON CO. v. RAYMOND et al., County Collectors.

CHICAGO CITY RY. CO. v. SAME. PEOPLE'S GAS LIGHT & COKE CO. v. SAME. CHICAGO TEL. CO. v. SAME.

United States Circuit Court, S.D. Illinois.

April 4, 1902

John S Miller, J. P. Wilson, E. R. Bliss, Holt, Wheeler & Sidley Sears, Meagher & Whitney, W. W. Gurley, Henry Crawford, and W. R. Crawford, for complainants.

Frank L. Shepard, Edwin W. Sims, and Wm. F. Struckman, for defendant S. B. Raymond, county collector, etc.

H. J Hamlin, Atty. Gen., and E. S. Smith, Asst. Atty. Gen., for defendant state board of equalization.

Charles M. Walker, Corp. Counsel, and Henry Scholfield, Asst. Corp. Counsel, for defendant city of Chicago.

Before GROSSCUP, Circuit Judge, and HUMPHREY, District Judge.

GROSSCUP Circuit Judge.

The complainants are utility corporations organized under the laws of Illinois, and operating in Cook county, Illinois. The defendants are the County Treasurer of Cook county, the local Town Collectors, and, in the first two cases, the State Board of Equalization. There exists in none of the cases therefore, the diversity of citizenship that confers jurisdiction on the Federal court.

The substance of the bill in each case is as follows:

That at the annual meeting of the State Board of Equalization for 1900, the capital stock of the complainant corporations, including their franchises, was assessed according to law; that on the basis of such assessments the taxes for the year 1900 were paid; that, subsequently, upon the relation of certain citizens of Illinois, mandamus proceedings were instituted in the Circuit Court for Sangamon County against the State Board of Equalization, charging that the board had, in respect of these assessments, illegally neglected and refused to discharge its duty, in that such assessments fell far below the real value of capital stock of the complainant companies; that on or about the first day of May, 1901, final judgment was rendered in said cause, directing a writ of mandamus to issue against the members of the State Board, requiring it to convene forthwith to reassess such capital stock, including the franchises, at their fair cash value, as of the first of April, 1900, 'arriving at such valuation from the best information obtainable, taking into consideration, among other things, the market value of the shares of stock of each corporation and the total amount of its indebtedness, except for current expenses. ' Upon appeal to the Supreme Court of Illinois this decree was affirmed. 61 N.E. 339. But in neither the Circuit Court nor the Supreme Court were the complainant corporations parties to the suit.

In pursuance of this mandate, the State Board of Equalization for the year 1901, successor in office to the board of 1900, but largely changed in individual membership, at its regular meeting for the year 1900 purported to re-assess the capital stock, including franchises, of the complainant corporations; and it is to restrain the collection of additional taxes on the basis of these re-assessments that these suits are brought.

In substance, it is averred that such re-assessments, if enforced, would deprive the complainant corporations of their property without due process of law, and deny to the complainant corporations the equal protection of the laws. Upon these provisions of the Constitution of the United States the jurisdiction of the Federal courts is predicated-- the contention being that the cases arise, within the meaning of the Judiciary Act, under the Constitution and laws of the United States.

Upon a previous motion, in the traction company cases pending in the Southern District (112 F. 607), we held that stock market quotations, though significant indicia of the value of capital stock, are not the absolute, ultimate measure of such value; that the real purpose of the Illinois statute is to reach capital stock subject to taxation, in accordance, not with the stock market quotation upon segregated shares of stock upon a single day in the year, but according to its stable value as an entirety; that such was the real purpose and judgment of the Supreme Court of the State in the mandamus case; whence, it followed, that the said board, itself an independent tribunal, was not shorn by the decision of the State Court of its right and duty, upon its own judgment, to ascertain the real value of the property to be assessed.

The fundamental question of fact involved in the present hearing in each of these cases is this: Did the State Board of Equalization, without fraud or mistake, and free from coercion, exercise its judgment in the making of the re-assessments complained of? In solving this question we have looked into, not only the re-assessments complained of, but also the assessments for the year 1901. A comparison between these records of the State Board is significant. In the case of the Chicago Union Traction Company, the assessment for the year 1901-- capital stock and tangible property aggregated-- falls from a little over fourteen millions of dollars (the re-assessment for 1900) to about eight millions, two hundred and fifty thousand dollars-- a loss of about forty per cent.

In the case of the Chicago Consolidated Traction Company, the depreciation is from a little over three millions, seven hundred and fifty thousand dollars to about two millions of dollars, or about forty-seven per cent.

In the case of the People's Gas Company, the depreciation is from over twelve millions and a half to about eight millions and a half, or about thirty-two per cent.

In the case of the Chicago City Railway, the depreciation is from a little over six millions to a little over four millions and a quarter, or about thirty per cent.

In the case of the Chicago Telephone Company, the depreciation is from a little less than two millions, six hundred thousand dollars to a little over one-million, seven hundred thousand dollars, or about thirty-four and one-half per cent.

In the case of the Chicago Edison Company, the depreciation is from a little over two millions, four hundred thousand dollars, to a little over one million, three hundred thousand dollars, or about forty-six per cent.

In the case of the South Chicago City Railway, the depreciation is from nearly five hundred seventy thousand dollars to a little less than three hundred thousand dollars, or about forty-seven per cent.

These assessments, so widely divergent, were upon the same properties, by the same board, entered almost on the same day. The dates as of which they spoke were, it is true, a year apart; the one being of the first of April, 1900, the other of the first of April, 1901. But the tide of stock quotations, and the tide of current values, were higher on the latter day than the former. If, between these two assessments, a considerable disparity should exist, the increase ought to be found in the assessment for 1901, and not in that for 1900.

We can comprehend a possible state of facts showing that neither of these assessments embodied the real judgment of the State Board. We can comprehend, also, a state of facts showing that either one or the other may have embodied the board's real judgment. But both can not be vindicated. In the very nature of things, one or the other has been made up under some species of fraud, mistake or coercion; and a few pregnant circumstances convince us that whatever may be said of the assessment for 1901, the re-assessment for 1900 can not be accepted as the independent judgment of the State Board.

One of these is this: The re-assessment of each of the complainant corporations for 1900 is a close approximation to the aggregate of its indebtedness and its stock value, as measured by the stock market quotations for April 1, 1900. The board seems to have adopted as its own standard in the making of these re-assessments the stock exchange record of that one day of the three hundred and sixty-five, and to have restricted its function to the mere arithmetic of adding up the figures of that day's record. In so doing the board followed, possibly, the interpretation put upon the mandate by the State circuit judge; or, the board may, in the exercise of its own judgment, have so interpreted the mandate; or, it may have felt that, under all the circumstances, an assessment according to that standard was the safer course for the members personally. But, on either supposition, the significance of the fact is not lessened. It goes far toward convincing us that the objective of the board was not the real value of the properties as entireties, but simply what the stock market for one day indicated the value to have been.

What was the real value, in fact, of the property re-assessed? A determination, approximately, of this fact will aid materially in determining whether the board, in the adoption of the standard referred to, exercised its real judgment as an independent tribunal in search of the value of the stock as an entirety. To arrive at such value we have looked into the earnings of the several complainants for the year 1900. The disclosures are made from the books of the company kept for the information of the stockholders. They seem to have been kept with no reference, prospectively, to tax valuations. In the absence of better data, we feel justified in accepting them for the purposes of this motion-- subject of course, to any inquiry that may affect their accuracy. Except in the case of the Union Traction Company, it is not shown whether the net earnings thus reported have made allowance for current...