Maxwell v. Norfolk & Western Ry. Co.

• Decision Date: 18 September 1935
• Docket Number: 454.
• Parties: MAXWELL, Com'r of Revenue, v. NORFOLK & WESTERN RY. CO.
• Court: North Carolina Supreme Court

181 S.E. 248

208 N.C. 397

MAXWELL, Com'r of Revenue, v. NORFOLK & WESTERN RY. CO.

No. 454.

Supreme Court of North Carolina

September 18, 1935

Appeal from Superior Court, Wake County; Grady, Judge.

Proceeding by the State of North Carolina, on the relation of A. J Maxwell, against the Norfolk & Western Railway Company, in which the defendant sought to recover reassessments made against the defendant by the Commissioner of Revenue. From an adverse judgment upon exceptions filed by plaintiff to the report of the referee, the defendant appeals.

Affirmed.

Proceeding to recover taxes paid under protest and alleged to have been erroneously or illegally assessed.

The Norfolk & Western Railway Company, hereafter called the defendant, duly filed with the North Carolina commissioner of revenue income tax returns for the years 1927, 1928, and 1929. None of these returns showed any taxable income for the specified period. On October 27, 1930, the commissioner of revenue made reassessments against the defendant, upon the basis of said returns, which resulted in tax levies, with interest thereon, for the respective years, as follows:

Year	Tax
1927	$25,737.70
Interest	3,989.34
	----------
Total	$29,727.04
1928	$25,097.32
Interest	2,384.25
	----------
Total	$27,481.57
1929	$28,225.22
Interest	987.88
	----------
Total	$29,213.10

Under protest, duly filed, the defendant paid these assessments, aggregating $86,421.71, and proceeded, agreeably to the terms of the statute, to recover them back. Its protest having been overruled by the commissioner, the defendant appealed from said ruling to the superior court of Wake county. Here the matter was referred, on motion of defendant, to Hon. J. Crawford Biggs, as referee, to find the facts and report the same, together with his conclusions of law, to the court.

The defendant contended that the pertinent parts of the Revenue Acts of 1927 and 1929, as interpreted and applied by the commissioner, "operated unconstitutionally upon protestant." With this contention, the referee, upon the facts found by him, agreed, largely upon authority of Southern Ry. Co. v. Kentucky, 274 U.S. 76, 47 S.Ct. 542, 71 L.Ed. 934. On exceptions duly filed, the judge of the superior court disagreed with the defendant's contention, overruled the determinative findings and conclusions of the referee, upheld the constitutionality of the statutes, as had already been done in Atlantic Coast Line R. Co. v. Doughton, 262 U.S. 413, 43 S.Ct. 620, 67 L.Ed. 1051, found supporting facts, and concluded that the defendant had failed to show want of due process, or lack of equal protection of the laws.

From judgment dismissing defendant's protest, it appeals, assigning errors.

Theodore W. Reath, of Philadelphia, Pa., F. M. Rivinus and W. W. Coxe, both of Roanoke, Va., Murray Allen, of Raleigh, and Burton Craige, of Winston-Salem, for appellant.

A. A. F. Seawell, Atty. Gen., and John W. Aiken and T. W. Bruton, Asst. Attys. Gen., for appellee.

STACY, Chief Justice (after stating the facts as above).

It may be conceded, as appellant alleges, that, from a procedural standpoint, the record is not in very satisfactory shape. Much of it is beside the point. However, as we understand it, the issues involved are comparatively simple. The case easily falls upon one side or the other of the constitutional line.

The defendant is a railroad, or public service corporation, operating in part within and in part without this state. It has three branch lines of railroad in North Carolina, with termini at Winston-Salem, Durham, and Elkland. Each of the three branches connects directly with the defendant's main line in Virginia at Roanoke, Lynchburg, and Abingdon, respectively.

The statutory formula for ascertaining the net taxable income for such a corporation is set out in section 312 of the Revenue Act of 1927 (Pub. Laws, c. 80), and substantially repeated in the same numbered section of the 1929 Act (Pub. Laws, c. 345), as follows: "When their business is in part within and in part without the State, their net income within this State shall be ascertained by taking their gross 'operating revenues' within this State, including in their gross 'operating revenues' within this State, the equal mileage proportion within this State of their interstate business, and deducting from their gross 'operating revenues' the proportionate average of 'operating expenses' or 'operating ratio' for their whole business, as shown by the Interstate Commerce Commission standard classification of accounts. From the net operating income thus ascertained shall be deducted 'uncollectible revenue' and taxes paid in this State for the income year other than income taxes, and the balance shall be deemed to be their net income taxable under this act. That in determining the taxable income of a corporation engaged in the business of operating a railroad under this section * * * when any railroad is located partly within and partly without this State, then said net operating income shall be increased or decreased to the extent of an equal mileage proportion within this State of any credit or debit balance received or paid, as the case may be, on account of car or locomotive hire."

The defendant filed its returns for the years in question under the Revenue Acts (Pub. Laws 1927, c. 80, and Pub. Laws 1929 c. 345) and Machinery Acts (...