Kansas City Southern Ry. Co. v. May

• Decision Date: 08 November 1924
• Docket Number: No. 6556.,6556.
• Citation: 2 F.2d 680
• Parties: KANSAS CITY SOUTHERN RY. CO. et al. v. MAY et al.
• Court: U.S. Court of Appeals — Eighth Circuit

2 F.2d 680 (1924)

KANSAS CITY SOUTHERN RY. CO. et al. v. MAY et al.

No. 6556.

Circuit Court of Appeals, Eighth Circuit.

November 8, 1924.

Frank H. Moore, of Kansas City, Mo. (Arthur F. Smith, of Kansas City, Mo., and Samuel W. Moore, of New York City, on the brief), for appellants.

A. P. Steel, of Ashdown, Ark. (Du Laney & Steel, of Ashdown, Ark., on the brief), for appellees.

Before STONE and KENYON, Circuit Judges, and FARIS, District Judge.

KENYON, Circuit Judge.

Appellants brought action in the District Court of the United States for the Western District of Arkansas against road improvement district No. 1 of Little River county, Ark., C. E. May, A. J. Russell, and P. G. Traylor, as a board of improvement of road improvement district No. 1 of Little River county, Ark., the same parties as board of improvement of "repair and extension district of road improvement district No. 1 of Little River County," A. T. Collins, sheriff, and R. E. Huddleston, county clerk, defendants, claiming that certain assessments made against appellants for the construction of roads in said district No. 1 were illegal and void, and asking that the collection of them be restrained. Appellant Texarkana & Ft. Smith Railway Company owns most of the right of way through the county of Little River. The two appellants under some arrangement operate as a continuous line from Kansas City, Mo., to Port Arthur, Tex.

Road improvement district No. 1 of Little River county, Ark., is a district organized under the general law of Arkansas, commonly known as the Alexander Road Law (Acts 1915, p. 1400), providing for the organization of improvement districts for the construction of highways. The district, as organized, includes approximately 8 miles (being about 86 acres) of the right of way of appellants, and embraces a farming community. The mileage of the three highways to be built within said district was about 15 miles. Appellants were assessed benefits of $335,000 on their right of way. Outside of the right of way there were approximately 24,000 acres in the district. The lands assessed were divided into two zones; those in zone No. 1 were assessed $40 per acre; in zone No. 2 $25 per acre. The amount of assessed benefits against the farm land was $890,874; against appellants, $335,000; and against other corporations, $129,000. After these assessments were made, notice was published, as provided by law, stating that parties aggrieved could appear before the county court on July 21, 1915, and that grievances and objections must be presented in writing. Appellants duly filed objections on that date; likewise four other property owners. No order was made on July 21st relative to the assessment of appellants' property. Assessments against two other property owners were acted upon. On July 29, 1915, the commissioners and county court met; the assessments of appellants and remaining parties who had filed objections were reduced; and the assessments of all the other property owners in the district were also reduced, although no objections had been filed by them, and no evidence heard.

The reduction of appellants' assessment was to carry out an agreement made between appellants' attorney and the board of commissioners of the road district, by which it was agreed that the assessment should be reduced from $335,000 to $80,000, or approximately 6 per cent. of the total original assessment of $1,354,874. Appellants also claim that it was a part of the agreement that the assessment should not be reduced on the other properties in the district where no objections in writing had been filed. The result of the reducing of the assessments was that the total assessment of benefits on all property in the district was reduced to $255,755. Appellants' assessment of $80,000 was approximately 31 per cent. of the new total assessment of benefits. Under the old assessment appellants were assessed approximately 24½ per cent. of the total cost, so the discrimination against appellants was increased by the new assessment. Appellants relied on the compromise agreement and did not learn of the action taken on July 29, 1915, reducing all the assessments, until the time for taking appeal under the statute had expired. Appellants' local attorney was thereafter informed by one of the commissioners of the situation, and was told by him that the railroad was worse off than it was before it had contested the proceeding, and would be compelled to pay a higher proportion of the taxes than it otherwise would. The district attorney of appellants endeavored to secure a reassessment by the commissioners, and appellants claim that they kept on trying to secure such reassessment, rather than engage in litigation, until April, 1921, when the district attorney was advised by the commissioners, after the tax for that year had been paid, that no reassessment would be granted. The tax was to be paid in installments extending over a period of years, and for six years prior to the commencement of this action appellants paid the proportional tax due for the year.

In 1920 the Arkansas Legislature passed "An act creating repair and extension district of road improvement district No. 1 of Little River county," for the purpose of extending two roads constructed by the original road district No. 1, and of repairing the roads constructed in said original road district. This repair and extension district had the same boundaries as road district No. 1, and it was declared in said act that all property in the road district would be benefited to an amount equal to 60 per cent. of the benefits assessed in road district No. 1. There being a mistake of description in the act of 1920, additional legislation was enacted in 1923 (Sp. Acts 1923, p. 307) to make it effective, and it is claimed the officers of the repair and extension district were about to levy taxes when this suit was brought.

A petition of intervention was filed by W. B. Worthen Company, holder of a mortgage, as trustee for the bondholders, and by order of the court the Worthen Company was made a party defendant.

Appellants claim that no benefit accrues to their property by reason of the construction of the roads; that a fraud was practiced upon them in the order that was entered on the 29th day of July, 1915, fixing the assessment upon their property at $80,000, and reducing other assessments without objection thereto having been filed in writing.

The trial court held that appellants could not sustain a suit to enjoin collection of the assessments on the ground that their property was not benefited by the improvement, for the reason that the time within which such a suit could have been brought had expired; that appellants had appeared in the county court and secured a reduction of the assessment; that no appeal was taken, and that having paid these annual assessments they could not be heard to complain of the unconstitutionality of the assessment.

The court further found that the fraud claimed by appellants in the entry of the order fixing the assessment at $80,000, and at the same time reducing all other assessments, was not established, and that if any such agreement, as claimed, had been made, appellants had notice of the reduction, and bringing no action to set aside the order, but paying the taxes for six years, were barred by laches from maintaining the suit in so far as road improvement district No. 1 was concerned. It held that any benefit to appellants from the road improvement under the Repair and Extension District Act was out of proportion to the assessments made against the property of other property owners, and granted a permanent injunction against the repair and extension district. From the action as to the repair and extension district no appeal was taken; hence that question is not before us. The appeal is from the decree refusing to grant relief against the assessment by road district No. 1.

Other questions are raised with relation to the levy for the year 1923 being in excess of the amount the district had authority to levy, and further complaint is made that a penalty of 10 per cent. for the tax of 1923 was assessed by the court. These questions become unimportant in the view we take of the case.

I. Was the assessment of benefits so arbitrary and discriminatory as to violate the provisions of the Fourteenth Amendment to the Constitution?

The law is well settled. Road districts for the construction of highways may be established in such method as the Legislature of the state may provide, and the burden of paying for such improvements may be apportioned among those benefited. This distribution of benefits by way of assessment for the purpose of taxation must not be arbitrary and discriminatory. It "must be estimated upon contiguous property according to some standard which will probably produce approximately correct general results." Kansas City Southern Railway Co. et al. v. Road Improvement District No. 6 of Little River County, Ark., 256 U. S. 658, 661, 41 S. Ct. 604, 65 L. Ed. 1151. If not, it violates the Fourteenth Amendment to the Constitution.

Speaking of a drainage assessment, in Thomas, Sheriff, etc., et al. v. Kansas City Southern Ry. Co. et al. (C. C. A.) 277 F. 708, 712, affirmed by the Supreme Court in 261 U. S. 481, 43 S. Ct. 440, 67 L. Ed. 758, this court said: "Such assessment cannot stand if it is `palpably arbitrary,' or if it is palpably discriminatory." That such is the test is established by Houck v. Little River Drainage District, 239 U. S. 254, 36 S. Ct. 58, 60 L. Ed. 266; Phillip Wagner, Incorporated, v. Leser et al., Judges and Tax Collector of Baltimore City, 239 U. S. 207, 36 S. Ct. 66, 60 L. Ed. 230; Miller & Lux, Inc., v. Sacramento & San Joaquin Drainage Dist., 256 U. S. 129, 41 S. Ct. 404, 65 L. Ed. 859; Kans. City So. Ry. v. Road Imp. Dist. No. 6, 256 U. S. 658, 41 S. Ct. 604, 65 L. Ed. 1151; St. Louis & Kansas City Land Co. v. Kansas City, 241 U. S. 419, 36 S. Ct. 647,...