Lehigh Valley R. Co. of New Jersey v. Martin

Decision Date14 December 1936
Docket Number4538 (1932).,No. 4537,4537
Citation19 F. Supp. 63
PartiesLEHIGH VALLEY R. CO. OF NEW JERSEY et al. v. MARTIN, State Tax Com'r of State of New Jersey et al. CENTRAL R. CO. OF NEW JERSEY v. SAME.
CourtU.S. District Court — District of New Jersey

Maximilian M. Stallman, of Newark, N. J., and Robert J. Bain, of Jersey City, N. J. (A. H. Elder, of New York City, of counsel), for plaintiffs.

David T. Wilentz, of Trenton, N. J., and Duane E. Minard, of Newark, N. J. (John J. Solan, of Trenton, N. J., of counsel), for defendants.

FORMAN, District Judge.

These cases are here on final hearing for a permanent injunction to enjoin the State Taxing Commissioner, the Comptroller, the Treasurer, and the Attorney General of the state of New Jersey, from collecting or enforcing certain taxes levied under the Railroad Tax Act of New Jersey (P.L.1888, c. 208, p. 269 4 Comp. St.N.J.1910, p. 5260, § 445 et seq.) as amended and supplemented, for the year 1932 (Comp.St.Supps.N.J. § 208 — 445 et seq.) on the property of the Lehigh Valley Railroad Company and the Central Railroad Company of New Jersey.

The plaintiff railroads own or lease and operate interstate systems of transportation that lie partly in New Jersey.

These suits are the first of a series of actions similar in nature brought by these and other plaintiffs against the same defendants concerning taxes alleged to be due in each succeeding year following 1932, up to and including 1935. We will deal here with the suits involving the year 1932 only.

The parties have stipulated that the 1932 cases shall be determined on the record which was made at the hearing before the State Board of Tax Appeals of New Jersey and reviewed by the Supreme Court of New Jersey in the cases concerning taxes for the year 1933. The parties stipulated further that this court should determine all questions of the admissibility and competency of the evidence offered in the record before the State Board of Tax Appeals. (See stipulation on file dated February 1, 1935.)

The Constitution of New Jersey (art. 4, § 7, par. 12) requires that "property shall be assessed for taxes under general laws, and by uniform rules, according to its true value."

Section 1 of the Railroad Tax Act provides: "That all the property of any railroad or canal company not used for railroad or canal purposes shall be assessed and taxed by the same assessors and in the same manner and at the same rate as the taxable property of other owners in the same municipal division or taxing district; all other property of any railroad or canal company shall be assessed and taxed as hereinafter directed; the tax imposed by this act shall be in lieu of all other taxation upon the property subject to taxation under the provisions of this act; in all cases where the real estate, tangible personal property and franchise of any company are assessed and taxed under this act, the shares of stock and the bonds and certificates of indebtedness of such company shall not be taxed in the hands of the shareholders, bondholders or creditors, except as hereinafter provided. (P.L.1888, p. 269.)" 4 Comp.St.N.J.1910, p. 5260, § 445.

Section 3 provides:

"That it shall be the duty of the board of assessors to * * * proceed to ascertain the true value of all property used for railroad or canal purposes of each railroad and of each canal company in this state, including its franchises, and they shall, in such ascertainment, ascertain:

"I. The length and value of the main stem of each railroad, and of the waterway of each canal and the length of such main stem and water-way in each taxing district;

"II. The value of the other real estate used for railroad or canal purposes in each taxing district in this state, including the roadbed (other than main stem), water-ways, reservoirs, tracks, buildings, water tanks, water works, riparian rights, docks, wharves and piers, and all other real estate, except lands not used for railroad or canal purposes;

"III. The value of all the tangible personal property of each railroad and of each canal company;

"IV. The value of the remaining property, including the franchise." 4 Comp. St.1910, p. 5264, § 447.

The principal contentions of the railroads are that their properties have been excessively valued by the use of improper principles which result in the denial of due process and subject interstate commerce to an undue burden, and that they have been discriminated against in that their properties have been assessed on the basis of full valuation while other property in the state is assessed at less than full valuation and results in the denial of equal protection of the law.

On the other hand, the defendants deny these contentions and further contend that these suits should have been presented to a court consisting of three judges, constituted under section 266 of the Judicial Code (28 U.S.C.A., § 380), and that an injunction granted in these suits would violate section 265 of the Judicial Code (28 U.S.C.A. § 379), for the reason that it would, in effect, restrain judicial proceedings of a state court.

The problems of taxation here are of vital consequence to the state and the several railroads involved. The railroads have naturally been an important source of revenue for the state, since they represent such considerable investments.

For the purpose of taxation the properties of the railroads are classified in the Railroad Tax Act of New Jersey as main stem, other real property, personal property and remaining property including the franchise.

Briefly, the lands on which the railroads operate are divided into parcels corresponding to the municipalities in which they are located, and each parcel is assessed on the basis of the valuation of contiguous lands for whatever purpose used; structures are assessed on the basis of the cost of reproduction less depreciation; personal property, such as engines, cars, machinery, is assessed on the basis of its physical condition, marine property being assessed on the basis of being in the state one-half of the time; and the franchise is apparently assessed without the application of formulæ but at a figure which represents the judgment of the State Tax Commissioner. The aggregate of the four classes is the system value or, more properly, unit value, in New Jersey. The financial reports which are required by law are considered collaterally. (See record pages 70, 97, et cetera.)

The assessments made and the taxes levied for 1932 involved in these cases were reviewed on appeal by the State Board of Tax Appeals, which entered judgments against the railroads and for the state.

In the 1932 cases, the railroads involved filed bills of complaint in the District Court for the District of New Jersey. The cases came on before a court of three judges on an application for a temporary injunction, and the court held that it had no jurisdiction, as required by section 266 of the Judicial Code, 28 U.S.C.A. § 380. (See order filed January 25, 1933.)

Thereupon the cases came on before a single judge, who granted motions to dismiss the bills of complaint. Central R. Co. of New Jersey v. Martin (D.C.) 3 F.Supp. 477. On appeal to the United States Circuit Court of Appeals for the Third Circuit, the decrees dismissing the bills of complaint were reversed and temporary injunctions granted. Central R. Co. of New Jersey v. Martin (C.C.A.) 65 F.(2d) 613.

The methods used in assessing railroad taxes in the state of New Jersey have been in effect for approximately fifty years. During that period of time the railroads have brought over one hundred suits attacking the laws under which the taxes are assessed. It appears, however, that for the first time in this series of cases the railroads have brought suits in which they contend that the methods of assessment used by the taxing authorities of the state violate the due process of law and the equal protection of the law clauses of the Fourteenth Amendment of the Constitution of the United States. Heretofore, the railroads have not questioned the methods by which the taxes have been assessed, and in the 1933 cases the Supreme Court of the state of New Jersey upheld the methods used by the State Tax Commission in fixing the valuation of railroad properties. Central R. Co. of New Jersey v. Thayer Martin, 114 N.J.Law, 69, 175 A. 637. Those cases came before the Supreme Court to review the determination or judgment of the State Board of Tax Appeals, which upheld the assessments made by the State Tax Commission. The Supreme Court dismissed the writs of certiorari. "Thus, notwithstanding that this contest has been waging for almost fifty years, and that almost every possible phase of this litigious question has been brought to our courts (it is estimated that it has been so brought in excess of 100 times) and received their consideration, it is not at all surprising that the prosecutors should, at this late stage of the contest, challenge the method employed and so firmly established in the making of these assessments." 114 N.J.Law, 69, at page 73 et seq., 175 A. 637, 639.

Defendants at the outset contend that this court, sitting as a single judge, has no jurisdiction over the issues herein involved. This is a repetition of their contention heretofore made before the three-judge court assembled upon their first application. They submit that the action of the State Board of Tax Appeals is tantamount to an administrative order and that as such the same cannot be restrained except in accordance with Section 266 of the Judicial Code (28 U.S.C.A., § 380). This section provides that "No interlocutory injunction suspending or restraining the enforcement, operation, or execution of any statute of a State by restraining the action of any officer of such State in the enforcement or execution of such statute, or in the enforcement or execution of an order made by an administrative board or commission acting under and pursuant to the statutes of such State, shall be issued * *...

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4 cases
  • Central R. Co. of New Jersey v. Martin
    • United States
    • U.S. District Court — District of New Jersey
    • November 1, 1939
    ...for the year 1932, the disposition of which, by this court, is reported in Lehigh Valley Railroad Co. of New Jersey et al. v. Martin, Tax Commissioner of State of New Jersey et al., etc., 19 F.Supp. 63 et seq., and involving taxes for the year 1933, as reported in Central Railroad Co. of Ne......
  • Southwest Exploration Company v. Riddell
    • United States
    • U.S. District Court — Southern District of California
    • July 22, 1964
    ...reversed, 115 F.2d 968 (3d Cir. 1940), cert. denied, 313 U.S. 568, 61 S.Ct. 943, 85 L.Ed. 1527 (1941), with Lehigh Valley R. Co. of New Jersey v. Martin, 19 F.Supp. 63 (D.N.J.1936), affirmed, 100 F.2d 139 (3d Cir. 1938), cert. denied, 306 U.S. 651, 59 S.Ct. 592, 83 L.Ed. 1049, rehearing den......
  • Application of State of New Jersey
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • November 15, 1945
    ...District Court held that the charges were not established by the evidence and denied the relief sought. Lehigh Valley R. Co. v. Martin, 1936, 19 F.Supp. 63 (opinion by Judge Forman). The Company appealed to the Circuit Court of Appeals for the Third Circuit which affirmed the judgment of th......
  • In re New York, S. & WR Co.
    • United States
    • U.S. District Court — District of New Jersey
    • December 14, 1940
    ...Court of the United States for the District of New Jersey (1938), General Rule 12, Term Calendars, at p. 14. 5 Lehigh Valley R. Co. v. Martin, D.C., 19 F.Supp. 63, 70. 6 Lehigh Valley R. Co. of New Jersey v. Martin, 3 Cir., 100 F.2d 7 Lehigh Valley R. Co. v. Martin, 306 U.S. 651, 59 S.Ct. 5......

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