Montana-Dakota Power Co. v. Weeks

• Decision Date: 24 October 1934
• Docket Number: 586,No. 581-584,587.,581-584
• Citation: 8 F. Supp. 935
• Parties: MONTANA-DAKOTA POWER CO. v. WEEKS, Tax Commissioner of North Dakota, et al., and five other cases.
• Court: U.S. District Court — District of North Dakota

8 F. Supp. 935

MONTANA-DAKOTA POWER CO. v. WEEKS, Tax Commissioner of North Dakota, et al., and five other cases.

Nos. 581-584, 586, 587.

District Court, D. North Dakota, S. W. D.

October 24, 1934.

Cyrus Field, of Fergus Falls, Minn., for plaintiff Ottertail Power Co.

Wm. Groth, of Minneapolis, Minn., for plaintiffs Northern States Power Co. and others.

Hayner Larson, of Minneapolis, Minn., for plaintiff Montana-Dakota Power Co.

O'Hare, Cox & Cox, of Bismarck, N. D., for plaintiffs Central West Service Co., North Dakota Power & Light Co., and Northern Power & Light Co.

P. O. Sathre, Atty. Gen., and J. M. Hanley and J. M. Hanley, Jr., both of Mandan, N. D., for defendants.

Before GARDNER, Circuit Judge, and MOLYNEAUX and MILLER, District Judges.

GARDNER, Circuit Judge.

There are here consolidated for purposes of trial six suits in equity brought by power companies operating in North Dakota to enjoin the defendants, members of the state board of equalization of North Dakota, from enforcing the provisions of chapter 252 of the Session Laws of North Dakota for the year 1933. This act imposes a 12 per cent. annual gross income tax against certain power companies described in the act. No deductions of any kind are permitted. Section 3 requires each power company on or before the first day of March in each year to make and return to the state tax commissioner, on such blanks as he may prescribe, a sworn statement of its gross receipts in the state of North Dakota during the preceding calendar year, together with such other information as the tax commissioner may require. Section 5 makes it the duty of the state tax commissioner to satisfy himself of the accuracy of the reports made by each power company and to correct any error or inaccuracies which he may discover therein. Section 6 provides in part as follows: "A total tax due from each power company, shall be computed and determined by the Tax Commissioner from the annual return herein required or from any other information. The State Board of Equalization shall meet at the office of the State Tax Commissioner, on or before the fourth Monday in April and assess and levy the tax as herein provided."

Section 11 provides that the taxes imposed shall be in lieu of all other taxes, state, county, municipal, road, or school taxes, licenses or fees upon power companies and their franchises, and upon all property of such companies, tangible or intangible, used or useful in power operation, except motor vehicle license and fuel taxes, and special assessments for local improvements.

The constitutionality of the statute is challenged upon various grounds, but we are of the view that it will only be necessary to consider the following contentions: First, the act is void because violative of section 179 of the Constitution of the state of North Dakota, which expressly provides the method by which the property of power companies shall be assessed. Second, the act is void because violative of section 1 of the Fourteenth Amendment to the Constitution of the United States, and section 13 of article 1 of the Constitution of the state of North Dakota, in that said act affords no opportunity at any stage of the tax proceedings to question the validity or propriety of the assessment or the amount of tax to be levied thereunder.

Section 179 of the Constitution of North Dakota (as amended in 1928, see Laws 1929, p. 402) provides in part as follows: "All taxable property except as hereinafter in this section provided, shall be assessed in the county, city, township, village or district in which it is situated, in the manner prescribed by law. The property, including franchises of all railroads operated in this state, and of all express companies, freight line companies, dining car companies, sleeping car companies, car equipment companies, or private car line companies, telegraph or telephone companies, the property of any person, firm or corporation used for the purpose of furnishing electric light, heat or power, or in distributing the same for public use, and the property of any other corporation, firm or individual now or hereafter operating in this state, and used directly or indirectly in the carrying of persons, property or messages, shall be assessed by the State Board of Equalization in a manner prescribed by such state board or commission as may be provided by law. * * *"

As has been observed, chapter 252, Session Laws of North Dakota for 1933, has attempted to substitute the gross earnings of power companies as the basis for taxation of their properties. The taxes provided for are in lieu of all other taxes, and the act fixes the assessment.

Section 179 of the Constitution provides that the property of power companies used for the purpose of furnishing light, heat, or power, or distributing the same for public use, "shall be assessed by the State Board of Equalization in a manner prescribed by such state board or commission as may be provided by law." There is no reference to gross receipts in any provision of the North Dakota Constitution, and of course, gross receipts do not constitute the property used by the power companies in furnishing light, heat or power, or distributing the same, and it seems fairly clear that the Constitution contemplates that the property shall be assessed, and that it shall be assessed by the state board of equalization. The word "assess" has a well-defined meaning when used in connection with the taxation of property. It means to make a valuation and appraisal of property, usually in connection with the listing of property liable to taxation. It has been said that to assess property is to place a value on it. Western Union Telegraph Co. v. Howe (C. C. A. 8) 180 F. 44, 52; State v. McClain, 136 Or. 53, 298 P. 211; State v. Redd, 166 Wash. 132, 6 P. (2d) 619; Clark v. City of Burlington, 101 Vt. 391, 143 A. 677; Seested v. Dickey, 318 Mo. 192, 300 S. W. 1088.

In Western Union Telegraph Co. v. Howe, supra, the Circuit Court of Appeals of this circuit, in considering certain provisions of the Constitution of Kansas with reference to the assessment of property, said: "The word `assessment' as used in the Constitution (section 1, art. 11) means valuation of property by the proper officers for the purposes of taxation."

The word "assess" implies the exercise of discretion on the part of the officials charged with the duty of assessing, including the listing or inventorying of the property involved, the determination of the extent of the physical property, and the placing of a value thereon. In determining the gross receipts there is no room for the exercise of discretion. Their determination may require mathematical computation and some skill as an accountant, but this act takes from the constitutional board all power of assessing the property of utility companies. This provision of the Constitution is mandatory (N. D. Const. § 21), and places in the state board of equalization and the tax commissioner the power and duty of ascertaining how much property a power company has in the state devoted to the generating and distributing of its products to the public, and that state board is vested with the exclusive power and authority of fixing the value of such property for purposes of taxation. This is all done by this legislative act which eliminates the function of assessing such property by the state board of equalization and substitutes therefor a legislative tax of 12 per cent. upon the gross earnings of such companies. The only act which may be performed by the state board of equalization under the challenged law is the ministerial function of applying the legislative rate to the amount determined by the tax commissioner to be the gross earnings of the companies.

The Supreme Court of North Dakota in Northwestern Improvement Company v. State, 57 N. D. 1, 220 N. W. 436, in discussing section 179 of the Constitution, held that the first sentence...