Louisville & N.R. Co. v. Bosworth

Decision Date22 September 1913
Docket Number729.
Citation209 F. 380
PartiesLOUISVILLE & N.R. CO. v. BOSWORTH et al.
CourtU.S. District Court — Eastern District of Kentucky

[Copyrighted Material Omitted] [Copyrighted Material Omitted]

Henry L. Stone, Helm Bruce, Ed. S. Jouett, Wm. A. Colston, and Robt. E. Fleming, all of Louisville, Ky., for complainant.

James Garnett, Atty. Gen., and M. M. Logan, Chas. H. Morris, O. S Hogan, and D. O. Myatt, Asst. Attys. Gen., of Frankfort, Ky., and John L. Rich, of Covington, Ky., for defendants.

COCHRAN District Judge.

This cause is before me on motion for a preliminary injunction and demurrer to the bill. The plaintiff is a Kentucky corporation, and the defendants are citizens and officers of the state of Kentucky. The injunction sought is to restrain the defendants from taking certain action which they threaten to take in relation to an assessment of certain of plaintiff's property for taxation made by the Board of Valuation and Assessment of the State, August 31, 1912, for the year 1912. The defendants Bosworth, Rhea, and Crecilius are, respectively, Auditor, Treasurer, and Secretary of State and, as such, constitute the board which made the assessment. The action which they threaten to take is to apportion the assessment to the several counties, cities, towns, and taxing districts through which plaintiff's railroad runs in order to the collection of local taxes. This is the only further action which it is within their power to take in relation thereto in such capacity. That which the defendants Bosworth and Likens threaten to take in their capacities as Auditor and Assistant Auditor is to certify such apportionments to the county clerks of the several counties through which plaintiff's railroad runs, a further step essential to the collection of local taxes, to enter in account, as a demand payable at the treasury of the state, the taxes due to the state based on the assessment, to report to the Attorney General the delinquency on plaintiff's part arising from a failure to pay those taxes, and to cause proceedings to be instituted against it because of its failure to pay them. And that which the other defendants, to wit, Garnett, Morris, Logan, and Hogan, respectively, Attorney-General and Assistants Attorney Generals, the defendant Franklin, Commonwealth's attorney for the Franklin circuit court, and the defendant Marshall, county attorney of Franklin county, threaten to take in such capacities, is to institute and prosecute proceedings against plaintiff by indictment and civil action to recover such taxes and penalties because of its delinquency in failing to pay them. All of this action is action to enforce the assessment.

The plaintiff claims that the assessment is void, and that therefore the defendants have no right to take such action, and the taking thereof will be a wrong to it. The assessment was made by the board under sections 4077 to 4081, inclusive, and section 4083, of the Kentucky Statutes, the constitutionality of which is unquestioned. The plaintiff's property consists of its railroad, rolling stock, stations, terminal facilities, rights to be and to do, and its good will. All of these constitute a physical and organic unit. This unit covers 13 different states, including Kentucky. On a mileage basis, a larger part thereof is in Kentucky than in any other state. That which was assessable by the board under these statutory provisions was the part of plaintiff's intangible property located in this state. Those provisions characterize it as its franchise or corporate franchise therein. The judicial phrase, therefore, is its intangible property so located. In the numerous cases which have arisen under these statutory provisions, the phrases 'corporate franchise' and 'intangible property' are treated as synonymous. I will hereafter refer to it as plaintiff's franchise in this state. These provisions have been the law of this state, substantially as they are now, for over 20 years. The assessment made by the board for the previous year, i.e., 1911, amounted to $11,899,200. The state tax thereon was $59,496, and the local taxes $86,994.41, or the two together, $167,644.37. The assessment that year was larger than it had been any previous year. The assessment complained of herein amounts to $45,428,074. The state taxes thereon amount to $227,140.37, and the local taxes to $332,166.52, or, the two together, to $559,306.89. By reason thereof, if it stands, the plaintiff will be compelled to pay $412,816.48 more than it paid the previous year, and it is reasonable to expect that hereafter it will have to pay at least this increased amount each year of its existence. This increase is not due to any change in the value of the plaintiff's intangible property in this state. It is due solely to a change in the judgment of the board as to its value. It should be noted, however, that there has been a change in the constituent members of the board, and the one here in issue is the first assessment which has been made by the board as it is now constituted.

Mr. Justice Brewer, referring to an increase in the assessment of a railroad's property by an Indiana board in the case of Pittsburg, etc., R.R. Co. v. Backus, 154 U.S. 421, 14 Sup.Ct. 1114, 38 L.Ed. 1031, which he characterized as 'a great increase,' but which was not as great an increase as here, said that it suggested 'that which is unfortunately too common-- an effort to cast an unreasonable proportion of the public burden upon corporate property. ' He added, however:

'Still it must be borne in mind that a mere increase in the assessment does not prove that the last assessment is wrong. Something more is necessary before it can be adjudged that the assessment is illegal and excessive, and the question which is to be now considered is whether the testimony shows that the assessment made by the state board can be judged illegal.'

And the court in that case upheld the assessment.

1. The plaintiff claims that the assessment is void on two grounds. One is that it violates the fourteenth amendment to the federal Constitution, in that it denies it the equal protection of the laws. The other is that the board did not follow the statute. It is because of the former claim that this court has essential jurisdiction of this suit. It would not otherwise have it. This is so because there is no diversity of citizenship between the parties hereto. Plaintiff, however, does not have to make this claim good. It is sufficient if the claim is not colorable, or, in other words, is made in good faith. As to this there can be no doubt.

The plaintiff, therefore, is entitled to the relief it seeks if it does no more than make good the other claim, to wit, that the board in making the assessment did not follow the statute. Siler v. L. & N.R. Co., 213 U.S. 175, 29 Sup.Ct. 451, 53 L.Ed. 753.

2. But before I can consider this claim of plaintiff I must notice and dispose of a preliminary contention put forth by the defendants. It is that this is a suit against the state of Kentucky and forbidden by the eleventh amendment to the federal Constitution, and that therefore it is not maintainable, even though the assessment complained of is void on both grounds relied on by plaintiff. As heretofore stated, the relief sought herein is an injunction against the defendants restraining them from taking certain action which they are threatening to take in the name and for the state, under color of their respective offices. What that action is has also already been set forth in detail. This contention, then, is that a suit in a federal court against state officers to enjoin them from taking action which they threaten to take, in the name and for the state, and under color of their offices, to enforce an assessment made by a board under a constitutional statute, as the one involved here is, is a suit against the state and so forbidden, and hence not maintainable, even though the assessment is void. The plaintiff meets the contention with the cases of Ex parte Young, 209 U.S. 123, 28 Sup.Ct. 441, 52 L.Ed. 714, 13 L.R.A.(N.S.) 932, 14 Ann.Cas. 764; W.U. Tel. Co. v. Andrews, 216 U.S. 165, 30 Sup.Ct. 286, 54 L.Ed. 430. It claims that they are conclusively against it. The defendants, on the other hand, say that, instead of this being so, these cases conclusively support their contention. This radical difference between the parties is not as to the thing decided in these cases. They agree as to what was decided in each. It was decided therein that a suit in a federal court against state officials to enjoin them from taking action which they threaten to take in the name of and for the state, under color of their offices, to enforce an unconstitutional statute, is not a suit against the state and so forbidden, and that such a suit is maintainable. The kernel of Mr. Justice Peckham's opinion in the Young Case is to be found in that portion thereof quoted by Mr. Justice Day in the W.U. Tel. Co. Case, which is in these words, to wit:

'The various authorities we have referred to furnish ample justification for the assertion that individuals who, as officers of the state, are clothed with some duty in regard to the enforcement of the laws of the state, and who threaten and are about to commence proceedings, either of a civil or a criminal nature, to enforce against parties affected an unconstitutional act, violating the federal Constitution, may be enjoined by a federal court of equity from such action.'

Where they differ is as to what follows from this decision. According to defendants, it follows therefrom that such suit is maintainable only when the threatened action sought to be restrained is action to enforce an unconstitutional act of the Legislature, i.e., an unconstitutional statute. And it is because...

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