Soo Line R. Co. v. State
Citation | 286 N.W.2d 459 |
Decision Date | 05 December 1979 |
Docket Number | No. 9625,9625 |
Parties | SOO LINE RAILROAD COMPANY, Plaintiff and Appellant, v. The STATE of North Dakota, acting by and through the State Board of Equalization; the County of Barnes; the County of Benson; the County of Bottineau; the County of Burke; the County of Burleigh; the County of Cass; the County of Cavalier; the County of Dickey; the County of Divide; the County of Emmons; the County of Foster; the County of Grand Forks; the County of LaMoure; the County of Logan; the County of McHenry; the County of McIntosh; the County of McLean; the County of Mountrail; the County of Nelson; the County of Pierce; the County of Ramsey; the County of Ransom; the County of Renville; the County of Richland; the County of Rolette; the County of Sargent; the County of Sheridan; the County of Stutsman; the County of Towner; the County of Walsh; the County of Ward; the County of Wells, Defendants and Appellees. Civ. |
Court | United States State Supreme Court of North Dakota |
Pearce, Anderson, Thames & Durick, Bismarck, for plaintiff and appellant; argued by William P. Pearce, Bismarck.
Robert W. Wirtz and Kenneth M. Jakes, Sp. Asst. Attys. Gen., Bismarck, for defendants and appellees.
William S. Murray, Bismarck, amicus curiae.
The Soo Line Railroad Company ("Soo Line") brought three actions pursuant to § 57-08-03 of the North Dakota Century Code 1 in Burleigh County District Court, seeking an adjudication that its 1974, 1975, and 1976 property tax assessments by the State Board of Equalization ("Board") are void and that the amounts of the tax paid in excess of the assessment which could lawfully have been levied should be refunded. The district court consolidated the three actions for trial because the parties were identical and the cases involved closely related questions of law or fact. The cases are identical except that the figures used in determining the assessments and tax computations vary from year to year. The district court entered judgment in favor of the Board and dismissed the actions. The Soo Line appeals from that judgment. We reverse the judgment of the district court and remand to the State Board of Equalization for reasons stated in the opinion.
The Soo Line is an interstate carrier of freight by rail which operates in a number of midwestern States, including North Dakota. The portion of the Soo Line system located in North Dakota consists of 1320 miles of track. This track is composed of a main line running from Portal in Burke County on the Canadian border in a southeasterly direction to Fairmount in Richland County on the Minnesota border, and several branch lines which serve many smaller communities throughout the State. The Soo Line passes through several counties in North Dakota.
The counties receiving any portion of the taxes paid by the Soo Line were joined as parties pursuant to § 57-08-04, N.D.C.C. 2 By stipulation, the Board appeared on behalf of all of the defendants. The parties also stipulated that the amounts of tax not in dispute could be treated by the respective counties as though no protest had been made.
The bulk of the eastbound freight on the Soo Line consists of raw materials originating in Canada and grain and sunflower seeds originating in agricultural States like North Dakota. The westbound freight consists primarily of manufactured goods being shipped from the eastern States to the western provinces of Canada. Approximately three-fourths of the westbound railroad cars are empty. Although much of the rail traffic in North Dakota involves the movement of coal, the Soo Line carries very small amounts of coal because it does not service the coal-rich regions of the State.
The Soo Line places considerable emphasis on the fact that the railroad industry is in a state of decline, having lost considerable amounts of business to other modes of transportation. The Board counters that although the railroads' share of the transportation business has declined, its business has increased in volume due to the growth of the nation's economy. The revenue growth of the railroads has certainly been less than that of the other transportation industries, making it virtually impossible for the railroads to raise capital by selling stock. The Soo Line argues that the railroad industry is economically unfeasible now and in a state of obsolescence, and that these factors should be taken into consideration in computing its tax assessments.
Section 57-05-01, N.D.C.C. (S.L.1967, ch. 425, § 1), which was effective at the time the 1974, 1975, and 1976 assessments were made, provided:
This means that the Board shall annually assess at its actual value the operating property of each railroad within the State. This is also required by § 179 of the North Dakota Constitution, which provides:
The Board assessed the operating property of the Soo Line for the years 1974, 1975, and 1976 in accordance with the provisions of § 179 of the North Dakota Constitution and § 57-05-01, N.D.C.C. (S.L.1967, ch. 425, § 1).
Section 57-02-27, N.D.C.C., in pertinent part, requires:
Section 57-02-01(4), N.D.C.C. (S.L.1969, ch. 469, § 11), which defined "true and full value" and which was the definition in effect at the time the assessments were made for the years 1974, 1975, and 1976 involved in the instant case, provided that:
(Emphasis added.)
Because railroads are not usually bought and sold on the open market, there is no "usual selling price".
The historical method of assessing railroad property is to first determine the value of the entire system and then allocate the proper portion of that system value to North Dakota. The goal of allocation is to fairly reflect the relation between the whole system and any given part of it. Approximately fifteen percent of the Soo Line system is in North Dakota. The parties are not in dispute as to the proper amount to be allocated to North Dakota. Rather, the dispute in the instant case involves the proper determination of system value and the use of different percentages of assessed value to compute taxable value for different categories of taxpayers.
The historical approach used in determining system value is to average several different indicators of value. Underlying this approach is the theory that the property has a value attributable to its use in railroad operation and that a willing buyer will continue that use. It is not an attempt to determine actual price but to determine selling price if there were in fact a willing buyer and a willing seller. The Board has traditionally accomplished this by taking a simple average of the following three factors (1) the...
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