Kansas City Southern Ry. Co. v. Ogden Levee Dist.

• Citation: 15 F.2d 637
• Decision Date: 29 October 1926
• Docket Number: No. 6960.,6960.
• Parties: KANSAS CITY SOUTHERN RY. CO. et al. v. OGDEN LEVEE DIST. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

15 F.2d 637 (1926)

KANSAS CITY SOUTHERN RY. CO. et al. v. OGDEN LEVEE DIST. et al.

No. 6960.

Circuit Court of Appeals, Eighth Circuit.

October 29, 1926.

A. F. Smith, of Waldron, Ark. (James B. McDonough, of Ft. Smith, Ark., Frank H. Moore, of Kansas, Mo., and S. W. Moore, of New York City, on the brief), for appellants.

Paul Jones, of Texarkana, Ark. (Seth C. Reynolds, of Ashdown, Ark., and Paul Jones, Jr., of Texarkana, Ark., on the brief), for appellees.

Before SANBORN, STONE, and KENYON, Circuit Judges.

KENYON, Circuit Judge.

The Legislature of Arkansas, by special act approved March 2, 1909 (Acts Ark. 1909, p. 103), created, for the purpose of the erection and maintenance of a levee along a portion of the Red river in Little River county, Ark., the Ogden levee district. The act was amended in 1917 (Acts Ark. 1917, p. 1853) in a manner hereinafter explained. Appellants (hereafter designated as such and as the railway) are the Kansas City Southern Railway Company and the Texarkana & Ft. Smith Railway Company. These railway companies operate a line of railroad from Kansas City to the Gulf of Mexico. Part of the right of way is in this levee district. Appellees are the Ogden levee district and its directors, who were selected in the method provided by the act.

This proceeding was instituted by appellants to restrain the enforcement of a special tax levied upon their property in the district in 1923 in the sum of $2,443.50, to which penalties had attached, making the amount involved over $3,000. Evidence was introduced and a trial had in the District Court for the Western District of Arkansas, which court dismissed the bill, holding that plaintiffs (appellants here) could not maintain the suit, for the reason that they had not availed themselves prior to bringing the same of the administrative remedies which the statutes of Arkansas and the act as amended provided, and that lapse of time precluded an attack upon the entire scheme of assessment.

I. The first inquiry naturally arising is whether the assessment of benefits against appellants was so excessive, arbitrary, and discriminatory as to violate section 1 of the Fourteenth Amendment to the Constitution, as, if this inquiry is resolved in favor of appellees, the case is ended. There is some discrepancy in the evidence as to the exact area of the levee district. We accept the figure, in our discussion of the issues involved, of 2,716.54 acres (exclusive of the right of way) as approximately correct; the railway right of way consisting of 24.41 acres, the trackage being 1.81 miles. The levee was constructed in 1909. Prior thereto the land was subject to overflow every year. Many hundreds of acres of land have been redeemed by the construction of the levee. By a change in the channel of the Red river there was created in the territory comprising the district three small lakes. The railway crosses two of them, and one, in the shape of a horseshoe, it crosses twice. Through the district the railway is constructed on an embankment, except across the lakes, where it is upon trestles. In 1915 and in 1923 there were breaks in the levee which permitted the water to come against the embankment of the railway, and the evidence of the district shows there had been some slides in the embankment at that time. The evidence also shows that in 1908, prior to the construction of the levee, when there was a severe flood, drift was washed against appellants' trestles, and that there had been no substantial amount of drift against the trestles since the levee was built. The trestles of the appellants were still maintained, notwithstanding the levee. During the 14 years following the creation of the district appellants have paid $27,412.83 in levee taxes. $25,000 of bonds have been issued by the district.

It was the contention of appellees in the trial court that the levee was of benefit to the railway both directly and indirectly — directly by protecting its embankments and trestles, and indirectly by reason of increased traffic due to the development of the farm lands in the district. The evidence shows that part of the production of these reclaimed lands was carried by truck to the town of Ashdown, where there are two other railways competing with appellants. The railway company introduced evidence to show that from 1911 to the time of trial the traffic out of Ogden (another town in the district) had decreased, instead of increased. The act of 1909 authorized the board of directors, for the purpose of constructing and maintaining the levee, to levy a tax not exceeding 4 per cent. per annum upon the property in the district (other than personal property) as assessed for purposes of general taxation.

The assessed value of appellants' property in the district was $48,870. The assessed value of the land in the district (outside of the railway's right of way), paying levee taxes to the district, was $21,165. The land seemed to have been assessed, regardless of improvements or of differences in the value of the lands, at a flat rate of $10 an acre, these assessments running from 5 to 15 per cent. of their value, while the railway property included in the right of way and the improvements thereon were assessed at approximately 56 per cent. of their value. The bases of the railway property assessments seem also to have included intangible values. The process of assessment as to the lands without the right of way and as to said railway right of way and property thereon was entirely different.

The law applicable to the creation of taxing districts and the assessment of property therein to pay for special improvements, such as drainage, roads, levees, etc., is well settled. Time and again the Supreme Court of the United States has laid down the rules of law which pertain to the situation shown to exist in this case. This court likewise has had many cases before it where the same questions were involved. We quote from a number of these cases, viz.:

Thomas v. Kansas City Southern Ry., 261 U. S. 481, 483, 43 S. Ct. 440, 441 (67 L. Ed. 758): "The Legislature of a state may, if consistent with its Constitution, establish a drainage district, may set the boundaries, and may apportion the burden by fixing the basis of assessment and of taxation. The Legislature's determination that lands will be benefited by a public improvement for which it authorizes a special tax is ordinarily conclusive. Its action in so doing cannot be assailed under the Fourteenth Amendment, unless it is palpably arbitrary or discriminatory."

In Milheim et al. v. Moffat Tunnel Improvement District et al., 262 U. S. 710, 721, 43 S. Ct. 694, 698 (67 L. Ed. 1194) the Supreme Court, referring to the question of classification, said: "It is well settled, however, that if a proposed improvement is one which the state has authority to make and pay for by assessments on property benefited the Legislature in the exercise of the taxing power has authority to determine, by the statute imposing the tax, what lands may be and are in fact benefited by the improvement, and, if it does so, its determination is conclusive upon the owners and the courts, and cannot be assailed under the Fourteenth Amendment, unless it is wholly unwarranted and a flagrant abuse, and by reason of its arbitrary character is mere confiscation of the particular property."

Kansas City Southern Railway Co. et al. v. Road Improvement District No. 6 of Little River County, Arkansas, 256 U. S. 658, 661, 41 S. Ct. 604, 605 (65 L. Ed. 1151): "Classification, of course, is permissible, but we can find no adequate reason for what has been attempted in the present case."

Thomas, Sheriff, etc., et al. v. Kansas City Southern Ry. Co. et al. (this Circuit) 277 F. 708, 712: "Therefore the test of law to be applied to the facts of this case is whether or not the facts show this assessment to be palpably arbitrary and discriminatory."

In Thornton et al. v. Road Imp. Dist. No. 1 of Clark County, Ark., et al., 291 F. 518, 530, 531, this court said: "Although the law or ordinance, pursuant to which an assessment of benefits and taxation thereunder are made authorizes or permits a fair and just assessment of benefits and levy of taxes, nevertheless, if the officers executing and applying that law make an assessment of benefits and a taxation thereon, that is oppressively excessive, arbitrary or confiscatory, or grossly disproportionate, or palpably discriminatory between the parties and property benefited thereby, that assessment and taxation cannot stand against one so assessed or taxed to his injury."

This court, in Board of Directors of Miller Levee Dist. No. 2 v. Prairie Pipe Line Co., 292 F. 474, 479, had under consideration the assessment against the Miller Pipe Line Company made by the Miller levee district which had been created by the Legislature of Arkansas, and in which the facts bear analogy to those in this case. The court held that the results of the assessments were unfair and that the method adopted was "palpably arbitrary and a plain abuse," and violated the Fourteenth Amendment to the federal Constitution, and said: "If the method pursued by the board in fixing the valuation of the property of the pipe line company for the purpose of the assessment here in question was strictly in accordance with the statute, then the statute cannot stand against the complaint here made." See, also, among the numerous cases on the subject, Houck v. Little River Drainage District, 239 U. S. 254, 36 S. Ct. 58, 60 L. Ed. 266; Gast Realty & Investment Co. v. Schneider Granite Co., 240 U. S. 55, 36 S. Ct. 254, 60 L. Ed. 523; Miller & Lux, Inc., v. Sacramento & San Joaquin Drainage District, 256 U. S. 129, 41 S. Ct. 404, 65 L. Ed. 859; Road Improvement Dist. No. 2 of Conway Co. et al. v. Missouri Pac. R. Co. (C. C. A.) 275 F. 600; Missouri Pac. R. Co. v. Road Improvement Dist., etc. (C. C. A.) 288 F. 502; Kansas City Southern Ry. Co. et al. v. May et al. (C. C....