State Bd. of Tax Com'rs v. Chicago, M., St. P. & P. R. Co.

Decision Date26 January 1951
Docket NumberNo. 17978,17978
Citation96 N.E.2d 279,121 Ind.App. 302
PartiesSTATE BOARD OF TAX COM'RS et al. v. CHICAGO, M., ST. P. & PAC. R. CO.
CourtIndiana Appellate Court

J. Emmett McManamon, Atty. Gen., Earl R. Cox, Dep. Atty. Gen., Norman J. Beatty, Dep. Atty. Gen., Winslow Van Horne, Auburn, of counsel, for appellants.

Bert Beasley, Indianapolis, T. Harlan Montgomery, Seymour, O. G. Edwards, Chicago, Ill., for appellee.


After due hearing the appellants, as the State Board of Tax Commissioners, fixed the value of the appellee's property in Indiana, for the purpose of taxation as of March 1, 1944, in the sum of $4,936,106. In all respects agreeable to the provisions of Burns' Stat. § 64-1020, the appellee appealed from such action to the Jackson Circuit Court where it filed a complaint alleging that said assessment constitutes a constructive fraud upon it in that the same is (1) grossly excessive, (2) the result of the application of fundamentally erroneous principles of assessment, and (3) is arbitrary and capricious. Except for the evidence the appellants certified to said court a complete transcript of its proceedings in the matter and the appellee thereupon answered under Rule 1-3. Upon the issues thus joined the court heard evidence de novo, found that said assessed valuation of $4,936,106 'was arrived at by said Board by a method that was arbitrary, unlawful, capricious and based upon fundamentally erroneous principles, thereby resulting in a grossly excessive assessment and that the same was constructively fraudulent, wrongful and illegal and is null and void.' Judgment went accordingly and the appellants' subsequent motion for a new trial was denied.

The parties are in controversy over the manner in which this court should approach the questions it has for determination. The appellants contend that their action in fixing the valuation of the appellee's property for the purpose of taxation was that of an administrative board and the only function the Jackson Circuit Court had was to determine whether the board's proceedings followed the statute and, if so, is its decision reasonable and not fraudulent, arbitrary or capricious. That the procedure before the board is not challenged as to regularity; there is ample evidence to support its action and therefore the Jackson Circuit Court could have arrived at its decision only through a fact finding process which was an administrative function in which it did not have the power to indulge. Hence its decision is contrary to law. On the other hand the appellee insists that the statute provides: 'Such appeal (to the Jackson Circuit Court) shall be tried by the court without the intervention of a jury, and said trial of such issue shall be governed by the laws governing civil actions.' That the case was so tried, the court found the board's action to be constructively fraudulent, arbitrary and capricious and, there being evidence to support such finding, this court is powerless to intercede in the absence of error otherwise.

After having concluded that the decision of the State Board of Tax Commissioners in making assessments in the manner provided by law and within the scope of its authority is final except under circumstances where relief may be granted by the courts, the Supreme Court, in Peden v. Board of Review of Cass County, 1935, 208 Ind. 215, 195 N.E. 87, 90, said: 'Under what circumstances may relief be granted by the courts in the assessments fixed by an assessor, the county board of review, or the state board of tax commissioners? Relief may be had if fraud is shown on the part of any of the parties in fixing the value; if it is shown that it was not honestly appraised, but the value was fixed arbitrarily and capriciously, and not in proportion to other property of like character and situation. * * * All of the above illustrations would call for judicial action, and could be brought before the courts in a proper proceeding, although there had been no statute authorizing an appeal.' (Our emphasis.) See also Shideler, Auditor, v. Martin, 1922, 192 Ind. 574, 136 N.E. 1, 137 N.E. 528. It would seem from this holding that where an assessment is attacked for fraud or because it is arbitrary and capricious, and no question of jurisdiction or procedural regularity is involved, the statute is merely declaratory of a pre-existing common law right and the case should be tried and determined as any other civil matter of similar nature. This contemplates the introduction of evidence bearing on those issues, a finding of facts by the court and judgment accordingly. Smith v. Lippman, 1944, 222 Ind. 261, 53 N.E.2d 157. On an appeal from such judgment we are bound by the facts found by the court below if there is any substantial evidence to support them.

An understanding of the question with which we are concerned requires a brief description of the appellee's property upon which the valuation in controversy was assessed. The Chicago, Terre Haute & Southeastern Railroad Company owns a line of railroad extending from Chicago Heights, Illinois, south to Danville, Illinois, and from there southeasterly into Indiana through Terre Haute, Linton, Bedford and Seymour to its southern terminal at Westport. A branch line extends from Latta to Sullivan. The line from Chicago Heights to Westport is approximately 298 miles in length and that from Latta to Sullivan about 14 miles. Of the total main and secondary track mileage of the Chicago, Terre Haute & Southeastern Railroad Company approximately 197 miles lie in Indiana to which there is appurtenant 161 miles of side track. All of the property of this railroad was leased to the appellee in 1921 for a term of 999 years. By the terms of such lease the appellee agreed to assume and pay the principal and interest on the outstanding securities of the lessee, to pay its taxes and cash annually in the sum of not to exceed $12,000 to cover the expense of maintaining the corporate organization of the lessee. The main line of this railroad from Chicago Heights to Terre Haute is paralleled on the west by the Chicago & Eastern Illinois Railroad and on the east by the New York Central. It passes through no large cities and performs no important local service, operating but one passenger train a day, from Terre Haute to Bedford and return. Its principal function is carrying coal mined along its rails in Indiana which approximated four million tons in 1943. A large part of this coal was used by the appellee in the operation of its railroad system and the balance was delivered to consignees along its lines. In 1943 the Chicago, Terre Haute & Southeastern Railroad Company had outstanding bonds and other obligations totaling $21,928,800 which, under the terms of the above lease, were guaranteed by the appellee.

The Chicago, Milwaukee, St. Paul and Pacific Railroad Company, the appellee herein, is a Wisconsin corporation owning and operating a system of railroads in 14 states. The average ratio between this system as a...

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