Southern Ry Co v. Watts Atlantic Ry Co v. Same Seaboard Air Line Ry Co v. Same Atlantic Coast Line Co v. Same Norfolk Southern Co v. Same

• Decision Date: 02 January 1923
• Docket Number: No. 382,No. 383,No. 368,No. 369,No. 381,368,369,381,382,383
• Citation: 260 U.S. 519,67 L.Ed. 375,43 S.Ct. 192
• Parties: SOUTHERN RY. CO. v. WATTS et al. ATLANTIC & Y. RY. CO. v. SAME. SEABOARD AIR LINE RY. CO. v. SAME. ATLANTIC COAST LINE R. CO. v. SAME. NORFOLK SOUTHERN R. CO. v. SAME
• Court: U.S. Supreme Court

260 U.S. 519

43 S.Ct. 192

67 L.Ed. 375

SOUTHERN RY. CO.

v WATTS et al.

ATLANTIC & Y. RY. CO.

v. SAME.

SEABOARD AIR LINE RY. CO.

v. SAME.

ATLANTIC COAST LINE R. CO.

v. SAME.

NORFOLK SOUTHERN R. CO.

v. SAME.

No. 368.

No. 369.

No. 381.

No. 382.

No. 383.

Argued Nov. 22, 23, 1922.

Decided Jan. 2, 1923.

Messrs. S. R. Prince and L. E. Jeffries, both of Washington, D. C., for appellants in Nos. 368 and 369.

[Argument of Counsel from page 520 intentionally omitted] Messrs. Murray Allen, of Raleigh, N. C., James F. Wright, of Norfolk, Va., and Forney Johnston, of Wash ngton, D. C., for appellant in No. 381.

Mr. Thomas W. Davis, of Wilmington, N. C., for appellant in No. 382.

Mr. W. B. Rodman, of Norfolk, Va., for appellant in No. 383.

Messrs. Wm. P. Bynum and Sidney S. Alderman, both of Greensboro, N. C., and James S. Manning, of Raleigh, N. C., for appellees.

Mr. Justice BRANDEIS delivered the opinion of the Court.

These five cases were heard together and present largely the the same questions of law. Each is an appeal from a decree entered by a federal District Court for North Carolina under section 266 of the Judicial Code (Comp. St. § 1243) denying an interlocutory injunction. In each a railroad company engaged in interstate commerce seeks to enjoin the taxing officials from collecting the ad valorem property taxes for the year 1921, imposed for local purposes, and the franchise tax imposed for state purposes. Some of the corporations plaintiff are foreign; some, domestic. One has its lines wholly within the state; four have lines also in other states. But these differences are without legal significance in this connection. The property taxes are assailed on the ground that, as assessed, they vioate the equal protection clause, the due process clause, and the commerce clause of the federal Constitution, the uniformity provision of the state Constitution, and the statutory method of valuation. The franchise taxes are assailed on the ground that the statute under which they are laid violates the commerce clause, the equal protection clause, and the due process clause of the federal Constitution, as well as the uniformity clause of the state Constitution; that the amounts of these taxes were illegally calculated, in violation of the statutes of the state; and that since they are fixed by a percentage of the ad valorem valuations, they must fall because those valuations were illegally made.

Many of the objections made raise questions as to the meaning and effect of recent statutes of the state which have not yet been construed by its courts; and we are reluctant to pass upon these questions. Some of the objections raise issues of fact on which the evidence is submitted by affidavit and is in certain respects conflicting. But in all the cases jurisdiction rests upon substantial federal questions. The objections to the validity of the legislation and of the assessments, whether arising out of the federal Constitution or out of the Constitution or statutes of the state, may be presented in a single suit. We must, therefore, determine state, as well as federal, questions. Michigan Central Railroad Co. v. Powers, 201 U. S. 245, 291, 26 Sup. Ct. 459, 50 L. Ed. 744; Greene v. Louisville & Interurban R. R. Co., 244 U. S. 499, 508, 37 Sup. Ct. 673, 61 L. Ed. 1280, Ann. Cas. 1917E, 88; Davis v. Wallace, 257 U. S. 478, 42 Sup. Ct. 164, 66 L. Ed. 325. All the objections urged have been considered. We are of opinion that none of them should be sustained. The more important ones will be discussed.

The controversy arose in this way.¹ By the Constitution of North Carolina taxation of real and personal property must be uniform and ad valorem 'according to its true value in money.' In the assessments made prior to 1920 nearly all classes of property had been grossly undervalued; but the undervaluation varied greatly in degree. The Revaluation Act of 1919 (Public Laws 1919, chapter 84) was passed in order to provide for new and fundamentally changed valuations of all property at full values. The valuation of real estate was to be made by county officials; that of railroad property by state board under an application of the unit rule; and the assessment so made was to be allocated by the state board to the counties on a mileage basis.² By that act the valuations made by these taxing boards were to become effective as assessments only upon approval by the Legislature. When so approved, they were to be the basis of the taxation for the years 1920 to 1923 inclusive. Revaluations of real estate and of railroa § were made under that act and were approved by the Legislature in August, 1920. Public Laws 1920, chapter 1. Through these revaluations the assessments of railroad property were, on the average, doubled, as compared with the assessments prevailing in 1919,³ and those of real estate were quadrupled. The aggregate assessment of all the railroad properties as revalued in 1920 was $250,587,158; the aggregate of the real estate, $2,006,124,997; that of the personal property, $807,866,443; and that of industrial and financial institutions $444,748,145.

The relatively larger increase in the revaluations of real estate and of other property resulted in railroad taxes for 1920 lower than had prevailed theretofore, and these taxes were duly paid. But widespread objection to continuing the 1920 revaluations as a basis for the taxation of real estate developed in the latter part of 1920. A severe depression in business had occurred; there was an abrupt decline in commodity prices, particularly farm products, and real estate values were affected by this decline. The Legislature, thereupon, made provision (Public Laws 1921, c. 38, § 28) under which, upon application of taxpayers, the 1920 revaluations of real estate could be reviewed by county boards and those of railroad property by the state board. These boards were authorized to make corrections wherever assessments were found to exceed existing values. By proceedings under act of 1921 reductions were made in 67 counties, varying from 1 to 50 per cent. in the valuations of real estate (including that belonging to the railroads not used in the transportation service). In 33 counties no reduction in the valuations of real estate was allowed. The Legislature of 1921 had made no provision for reviewing the revaluations of personal property; and the assessments thereon remained unchanged, although the valuations of personalty had also been greatly increased in 1920. Under the Transportation Act of 1920, the Interstate Commerce Commission issued, in the latter part of 1920, orders pursuant to Ex parte 74, Increased Rates, 58 Interst. Com. Com'n. R. 220, raising freight rates in North Carolina 25 per cent. and passenger rates 20 per cent. over those prevailing when the revaluation of 1920 was made. Thereafter the five railroads applied to the state board for reduction of their valuations as the basis for taxation in 1921 and subsequent years. The application of the Norfolk & Southern was granted in part; and its assessment was reduced from $27,023,462 to $22,840,932. But, after due hearing, and rehearings, the state board refused to modify the assessments of the other four railroads which had been fixed by the Legislature of 1920. Thereupon these suits were begun.

The contention of the railroads that the property taxes as assessed are obnoxious to the federal Constitution was rested here mainly on the claim that there is a denial of equal protection of the laws. This claim is asserted on several grounds. It is contended, in the first place, that the act of 1921 providing for the review of valuations is void. The argument is that the railroads were discriminated against, because real estate owners are given an appeal on assessments from the county board to the state board of equalization, but that no such appeal is provided from the assessment of railroads. It is also argued that there is discrimination in this: While chapter 38, § 28g, provides for reduction by the state board in the valuation of a railroad only where it applies therefor, reductions in the value of all real estate within the county were, under section 28a, to be made provisionally, if the county board determined that the 1920 valuation was, as a whole, in excess of a fair value, and that in such event the percentage of the average excess would be applied to each parcel in the county, unless and until the assessment of individual real estate owners should be revised by the state tax commission. The differences in the classes of property, and in the conditions of ownership, obviously made difference in treatment unavoidable. Differences in the machinery for assessment or equalization do not constitute a denial of equal protection of the laws. New York v. Barker, 179 U. S. 279, 21 Sup. Ct. 121, 45 L. Ed. 190.

The claim that plaintiffs have been denied equal protection of the laws appears to rest more largely on the charge that discrimination has been practiced against them in administering the tax laws. It is urged that county boards, proceeding under section 28a, of the act of 1921, reduced real estate valuations quite generally, but that the state board, acting under section 28g, refused to reduce the valuation of any railroad except that of the Norfolk & Southern. The rule is well settled that a taxpayer, although assessed on not more than full value, may be unlawfully discriminated against by undervaluation of property of the same class belonging to others. Raymond v. Chicago Traction Co., 207 U. S. 20, 28 Sup. Ct. 7, 52 L. Ed. 78, 12 Ann. Cas. 757. This may be true, although the discrimination is practiced through the action of different officials. Greene v. Louisville & Interurban R. R. Co., 244 U. S. 499, 37 Sup. Ct. 673, 61 L. Ed. 1280, Ann. Cas. 1917E, 88. But, unless it is shown that the undervaluation was intentional and systematic, unequal assessment will not be held to vioate the equality clause. Sunday Lake...