City Ry. Co. v. Beard

• Decision Date: 02 October 1923
• Docket Number: 41.
• Parties: CITY RY. CO. v. BEARD, County Treasurer, et al.
• Court: U.S. District Court — Southern District of Ohio

293 F. 448

CITY RY. CO. v. BEARD, County Treasurer, et al.

No. 41.

United States District Court, S.D. Ohio, Western Division.

October 2, 1923

Robert K. Landis (of McMahon, Corwin & Landis), of Dayton, Ohio, for plaintiff.

Haveth E. Mau, Pros. Atty., of Dayton, Ohio, and Ralph E. Hoskot Asst. Pros. Atty., of Dayton, Ohio, for defendant Beard.

C. C Crabbe, Atty. Gen., of Ohio, and W. J. Meyer, of Columbus Ohio, Sp. Counsel, for the State Tax Commission.

SATER District Judge.

The comprehensive and admirable report of the master leaves but a few points requiring consideration. Especially is this so in view of my former opinion, found in 283 F. 313, and 20 Ohio Law Rep. 213.

This is one of a series of cases brought by public utility and public service companies in the courts of this district under my immediate control. In each of such cases the ground of attack is the same. All save this are by common consent held in abeyance, awaiting final decision of the instant case. The several cases in the aggregate assail the validity of the tax imposed on the respective plaintiffs in more than one-half of all the counties in the state. The record shows that in many counties, to the knowledge of the taxing authorities including the state tax commission, real estate is and for a long time has been valued for taxation in this state at less than its money value. This case is therefore of more than ordinary importance.

Although the several other like cases are not at this time before the court for decision, the law applicable to the rights of an individual plaintiff only must be the same as it would be were all of the cases of the same class as this for decision at this time. Sioux City Bridge Co. v. Dakota County, 260 U.S. 441, 43 Sup.Ct. 190, 67 L.Ed. 340, decided January 2, 1923, by the Supreme Court.

Equity will not relieve against an assessment merely because it happens to be at a higher rate than that of other property. 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 in taxation. What may be called sporadic cases of discrimination cannot be remedied by the court. A court, however, can interfere when it is made clear that there is, with respect to certain species of property, systematic, intentional, and unlawful undervaluations for taxation by the taxing officers, which necessarily effect an unjust discrimination against the species of property of which the complainant is the owner. Such was the rule announced by Judge (now Chief Justice) Taft in the much-cited case of Taylor v. Louisville & N.R. Co., 88 F. 350, 373, 31 C.C.A. 537 (C.C.A. 6). An intentional discrimination in taxation is fraudulent, and a court of equity will grant relief against such fraud. The rule of evidence announced in the Taylor Case is that the proof of systematic, intentional, and unlawful valuation for taxation must be clear, for the reason that an action to enjoin a tax is a collateral attack upon the judgment of a quasi judicial tribunal. 88 F. 374, 31 C.C.A. 537. In Louisville Trust Co. v. Stone, 107 F. 305, 308, 46 C.C.A. 299 (C.C.A. 6), Judge (later Mr. Justice) Day stated that the proof must be clear and convincing that a systematic discrimination has been made before a federal court will interfere by injunction with the assessment of taxes and the collection of revenues of the state. The master has found that the plaintiff has sufficiently made the legally required proof as to property valuations to entitle it to the major part of the relief prayed for. In that conclusion I concur. The record is so voluminous he did not in his opinion review all of the evidence, but specifically states that his conclusion as to its sufficiency rests upon all of the evidence adduced-- a fact perhaps not adequately noticed in the criticism of his report.

That the Ohio statute provides for the separation of the property of a public utility into two classes for the purposes of assessment is not helpful to the defense. The valuation fixed for taxation must in any event be the money value. The percentage of the rate and the basis of the valuation must be the same. As was said in Exchange Bank of Columbus v. Hines, 3 Ohio St. 1, 15, taxing by a uniform rule, such as is required in Ohio, necessitates uniformity, not only in the rate of taxation, but also uniformity in the mode of assessment upon the taxable valuation; uniformity in taxing implies equality in the burden of taxation, and the equality of burden cannot exist without uniformity in the mode of assessment as well as in the rate of taxation. See approval of this rule in Cummings v. National Bank, 101 U.S. 153, 158, 25 L.Ed. 903, and Greene v. Louisville & Interurban R.R. Co., 244 U.S. 499, 515, 37 Sup.Ct. 673, 61 L.Ed. 1280, Ann. Cas. 1917E, 88. The statute may classify property, as in the case of bank shares, for instance, but the valuation fixed ultimately is to be the market value, as was illustrated in Wagoner v. Loomis, 37 Ohio St. 579, a case which, like McCurdy v. Prugh, 59 Ohio St. 465, 55 N.E. 154, differs from the one at bar in that no fraud, conspiracy, or other official unfaithfulness was charged against the taxing officers. Under the Ohio Constitution and the interpretations of it by the state Supreme Court, all property must be taxed uniformly at its money value. In the Wagoner Case, Judge McIlvaine said:

I see 'nothing in the Constitution which requires property to be taxed according to the same per cent. of its true value in money, save only the 100 per cent.'

Other cases than those above noted enforcing the rule of uniformity of taxation at the money value of the property taxed are City of Zanesville v. Richards, 5 Ohio St. 589, Cincinnati Gaslight, etc., Co. v. State, 18 Ohio St.at star page 243, Cleveland Trust Co. v. Lander, 62 Ohio St.at page 272, 56 N.E. 1036, Anderson v. Brewster, 44 Ohio St.at page 585, 9 N.E. 683, and Cummings v. National Bank, 101 U.S. 153, 25 L.Ed. 903.

The master has correctly found that real estate in Montgomery county is listed on the tax duplicate for assessment purposes at not more than 60 per cent. of its true value. The defense claims that, even if the real estate is taxed at but 60 per cent. of its actual worth, the failure to prove that personal property is, by official misconduct, taxed at less than its money value is a failure to prove discrimination against the plaintiff, the larger portion of whose property is personal. It is safe to say that no one knows, or has ever known, or can ascertain the true value of the personal property in Ohio. The law does not cast on plaintiff the burden of establishing the impossible. In the Wagoner Case, 37 Ohio St. 579, Judge McIlvaine said:

'Personal property generally is annually listed and valued by the owner under oath.'

The same is still true. At the time he wrote his opinion (1881) the taxing officers were empowered for just cause to increase a taxpayer's return, as they may do under the present law. Much of the personal property is invisible, for all practical purposes incapable of ascertainment, is not a matter of record, as is real estate, and is easy of concealment. In Cummings v. National Bank, involving Ohio taxing laws, Mr. Justice Miller, at page 162 of 101 U.S., page 903 of 25 L. Ed., after alluding to the fact that the Constitution and statutes of many states by express provision designed compulsory uniformity of taxation at the actual value of all property, adds:

'But it is a matter of common observation that in the valuation of real estate this rule is habitually disregarded.'

It is not only a matter of common observation, but of common knowledge, in Ohio, that the personal property returned for taxation is but a relatively small part of the aggregate of such property. For many years past so great is the evil that its correction has been a subject of perennial discussion in the press and political campaigns for the election of legislators, and the electors of the state on different occasions have been called upon to vote upon constitutional amendments designed to get upon the tax duplicate for taxation all, or a much larger part, of the personal property, and unless the courts defeat the present attempted referendum, the voters at the coming November election will again have the privilege of voting upon taxing laws and question of taxation. Mr. Justice Miller, in the Cummings Case, 101 U.S. 163, 25 L.Ed. 903, states the belief that the valuation of real estate for taxation rarely exceeds one-half of its correct salable value, and then assigns the reason for it thus:

'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.'

It has already been said that an intentional discrimination in taxation is fraudulent and the federal courts have jurisdiction to grant relief against such fraud. If therefore, the contention of...