Smith v. Northern Pac. Ry. Co.

• Decision Date: 03 March 1941
• Docket Number: 28250,28249.
• Citation: 7 Wn.2d 652,110 P.2d 851
• Parties: SMITH, County Assessor, v. NORTHERN PAC. RY. CO. et al. STATE ex rel. PIERCE COUNTY v. TAX COMMISSION et al.
• Court: Washington Supreme Court

110 P.2d 851

7 Wn.2d 652

SMITH, County Assessor, v. NORTHERN PAC. RY. CO. et al.

STATE ex rel. PIERCE COUNTY v. TAX COMMISSION et al.

Nos. 28250, 28249.

Supreme Court of Washington, En Banc.

March 3, 1941

Actions consolidated for trial, by Fred Smith, as Assessor of Pierce County, against the Northern Pacific Railway Company and others, for a declaratory judgment as to the assessable character of certain personal property of named defendant and by the State, on the relation of Pierce County, against the Tax Commission and others for a writ of certiorari to review the Commission's order that such property be assessed as operating property of the railway company. From decrees adjudging the property assessable as operating property, plaintiffs appeal.

Affirmed.

Appeal from Superior Court, Thurston County; John M. Wilson, judge.

Thor C Tollefson and G. E. Peterson, both of Tacoma, for appellants.

Robert S. Macfarlane, Dean H. Eastman, and Earl F. Requa, all of Seattle, for respondent Northern Pac. Ry. Co.

Smith Troy and R. G. Sharpe, both of Olympia, for respondent Tax Commission.

STEINERT Justice.

Two actions were brought in the superior court to determine whether certain personal property owned and held by defendant railroad company should be assessed as 'operating property' or as 'non-operating property,' as those two descriptive terms are defined by chapter 123, Laws of 1935, Rem.Rev.Stat.Supp. § 11156-1 et seq., which provides a method for the assessment and taxation of property of transportation and other utility companies. One of the actions was brought by the assessor of Pierce county against the Northern Pacific Railway Company and the members of the state tax commission, and sought a declaratory judgment relative to the assessable character of certain personal property for the year 1940. That action was instituted prior to the entry of any order by the tax commission relative to the assessment of respondent's railroad property for that year. The other action, brought by the State of Washington, on the relation of Pierce county, against the same defendants, was instituted after the tax commission had entered an order directing that the property in question be assessed for the year 1940 as 'operating property.' In that action plaintiff sought a writ of certiorari to review the tax commission's order. The two causes were consolidated for trial, and, upon a trial by the court, a decree was entered in each cause adjudging the property to be assessable as 'operating property.' From each decree, the respective plaintiff has appealed.

The facts are not in dispute. Respondent Northern Pacific Railway Company owns an interstate railroad extending from Lake Superior, in Wisconsin, through a number of states, including Washington, to Puget Sound and to Portland, Oregon. Its main or branch lines extend through, or into, twenty-three counties, including Pierce county, in Washington. In the latter county, the company maintains repair shops and an assembling plant.

At twelve o'clock noon on January 1, 1940, respondent owned personal property of the cash market value of many thousands of dollars, and consisting of materials, supplies, shop machinery, tools, and equipment then physically located in Pierce county, and which it had theretofore purchased or otherwise acquired for use in the operation, maintenance, and repair of its railroad in the state of Washington. On that date, none of the property had actually been installed as part of the company's railroad, but all of that property, being then set apart, was held by the company in storage, exclusively in anticipation, and with the intention, of subsequently installing it as a part of its railroad, or of utilizing it in the maintenance and operation thereof. The same conditions of ownership had existed, and the same practice had been followed, in preceding years, and they will, unless otherwise interrupted, continue to exist and be followed in the future. In accordance with rules and regulations prescribed by the Interstate Commerce Commission, all of the property, since its purchase, has been carried on the company's books of account as 'materials and supplies,' and the purchase price thereof has been paid, and in the future will similarly be paid, from the company's working capital.

The cash market value of the property on January 1, 1940, greatly exceeded Pierce county's relative track mileage proportion of the cash market value of the total amount of personal 'operating' property then owned and held by the railway company in the state of Washington.

On June 26, 1940, pursuant to the requirements of chapter 123, Laws of 1935,§ 7, as amended by chapter 206, Laws of 1939, § 19, Rem.Rev.Stat.Supp. § 11156-7, the tax commission assessed the true cash value of the 'operating property' of all the companies mentioned in that act, including respondent railway company, as of twelve o'clock noon of January 1, 1940, and entered such assessments in an assessment roll, notice of which was mailed to the companies, all as required by the statute. At the time of making such assessments, the tax commission, pursuant to the authority vested in it by chapter 123, Laws of 1935, § 2, Rem.Rev.Stat.Supp. § 11156-2, determined that all of the property above referred to was part of the 'operating property' of respondent railway company, and was assessable under that classification. Appellants have contended, and now contend, that all of the property here involved constituted 'non-operating property' within the meaning of the statute, and upon that theory brought, and have appealed, these two actions.

The term 'operating property' is defined by § 1, subd. 17, of the 1935 act, Rem.Rev.Stat.Supp. § 11156-1(17), as follows:

'The term 'operating property' shall mean and include all property, real and personal, owned by any company, or held by it as occupant, lessee or otherwise, including * * * devices, appliances, instruments, equipment, machinery, * * * and all other property of a like or different kind, situate within the State of Washington, used by the company in the conduct of its operations; * * *.' (Italics ours.)

The term 'non-operating property' is defined by § 1, subd. 18, of the act, Rem.Rev.Stat. Supp. § 11156-1(18), as follows: 'The term 'non-operating property' shall mean all physical property owned by any company, other than that used during the preceding calendar year in the conduct of its operations. * * *' (Italics ours.)

Section 2 of the act (Rem.Rev.Stat. Supp. § 11156-2), provides: 'In all matters relating to assessment and taxation the commission shall have jurisdiction to determine what is operating property and what is non-operating property.'

Other sections of the 1935 act, as amended by the 1939 act, prescribe the procedure for the assessment and taxation of both 'operating property' and 'non-operating property' owned by companies of the types enumerated in the act.

Section 7 (Rem.Rev.Stat.Supp. § 11156-7) provides that the tax commission shall, beginning with the year 1936, and annually thereafter, make an assessment of the operating property of all such companies, and, between the fifteenth day of March and the first day of July of each year, shall prepare an assessment roll upon which it shall enter and assess the true cash value of all the operating property of the companies as of the first day of January of the year in which the assessment is made.

Section 15 of the act (Rem.Rev.Stat.Supp. § 11156-15) provides that the actual cash value of the operating property, as fixed and determined by the state board of equalization, shall be apportioned by the tax commission to the respective counties, and to the taxing districts thereof wherein such property is located, in the following manner: '(a) Property of Steam, interurban and logging railroad companies, * * * upon the basis of that proportion of the value of the total operating property within the state which the mileage of track, as classified by the commission * * * within such county or taxing district bears to the total mileage thereof within the state, at the end of the calendar year last past. For the purpose of such apportionment the commission may classify railroad track.'

Section 16 of the act (Rem.Rev.Stat.Supp. § 11156-16) provides that, when the state board of equalization shall have determined the equalized assessed value of the operating property of each company in each of the respective counties and in the taxing districts thereof, the tax commission shall certify such equalized assessed value to the county assessor of the proper county, and that the county assessor shall enter the real operating property upon the real property tax rolls and the personal operating property upon the personal property tax rolls of his county, together with the values so apportioned, and that the same shall constitute the assessed valuation of the operating property of the company in such county and for the taxing districts therein for that year, upon which valuation taxes shall be levied and collected in the same manner as on the general property of such county.

There is no question but that the procedure prescribed by §§ 7, 15, and 16 of the amended act was followed by the tax commission in the instant case.

Relating to the assessment of 'non-operating property,' § 17 of the 1935 act (Rem.Rev.Stat. Supp. § 11156-17) provides: 'All property of any company not assessed as operating property under the provisions of this act shall be assessed by the assessor of the county wherein the same may be located or situate the same as the general property of the county.' (Italics ours.)

The tax commission, it will be recalled, determined that none of the property here involved came within the...