Trailer Train Co. v. State Bd. of Equalization

• Decision Date: 25 January 1983
• Docket Number: No. 81-4188,81-4188
• Citation: 697 F.2d 860
• Parties: TRAILER TRAIN COMPANY, a corporation and Railbox Company, a corporation, Plaintiffs-Appellees, v. STATE BOARD OF EQUALIZATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 860

697 F.2d 860

TRAILER TRAIN COMPANY, a corporation and Railbox Company, a corporation, Plaintiffs-Appellees, v. STATE BOARD OF EQUALIZATION, Defendant-Appellant.

No. 81-4188.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 10, 1982.

Decided Jan. 25, 1983.

Calvin J. Abe, Deputy Atty. Gen., San Francisco, Cal., for defendant-appellant.

Weyman Lundquist, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of California.

Before HAYNSWORTH, ^* and CHOY, Circuit Judges, and JAMESON, ^** District Judge.

CHOY, Circuit Judge:

The issue in this case is whether the district court erred in granting a preliminary injunction preventing the California State Board of Equalization (Board) from collecting an amended property-tax bill levied on appellees' railroad cars. The district court found that the imposition of the additional tax impermissibly conflicted with Sec. 306 of the Railroad Revitalization and Regulatory Reform Act of 1976 (the 4-R Act), current version at 49 U.S.C. Sec. 11503 ¹, which prohibits the taxation of rail-transportation property at a rate higher than the rate generally applicable to commercial and industrial property in the same assessment jurisdiction. We concur in the district court's underlying conclusions that Sec. 11503 applies to the Board's attempt to collect the additional tax, that Sec. 11503 authorizes a district court to enjoin tax-rate discrimination, and that, under the circumstances of this case, the traditional prerequisites for preliminary injunction need not be satisfied. We find, however, that the district court's method of selecting the tax rate generally applicable to commercial and industrial property, which is the necessary first step in determining the existence of tax-rate discrimination, was defective. We therefore affirm in part, and vacate and remand in part.

I. Facts ²

California classifies and taxes the bulk of its property as "secured" or "unsecured." ³ The secured and unsecured tax rolls each contain both real and personal property. The secured tax rate is calculated anew each fiscal year, while the unsecured tax rate is equal to the tax rate applied to secured property in the preceding fiscal year. Cal. Const. art. XIII, Sec. 12; Cal.Rev. & Tax Code Sec. 2905 (West 1970 & Supp.1982).

Private railroad cars are considered personal property and are subject to a separate tax under California's Private Railroad Car Tax Law, Cal.Rev. & Tax Code Sec. 11401 (West 1970 & Supp.1982). The tax rate for private railroad cars is the average rate of general property taxation for the preceding year, id., which is basically the weighted average of the prior year's secured and unsecured tax rates.

In June 1978, California voters approved Proposition 13, Cal. Const. art. XIIIA which limits the tax rate applicable to real property. Relying on Article XIII, section 2, of the California Constitution, which requires that personal property not be taxed at a rate higher than that applied to real property in the same jurisdiction, the Board at that time determined that the Proposition 13 tax-rate limitation must also be applied to limit the tax on private railroad cars. Accordingly, it levied a tax on railroad cars owned by the Trailer Train Company and the Railbox Company (the Companies) for fiscal year 1978-79 at the lower Proposition 13 rate, estimated at $4.85 per hundred dollars of assessed value, instead of the usual rate prescribed by the Private Railroad Car Tax Law. This latter tax rate, calculated by taking the weighted average of the secured and unsecured rates for fiscal year 1977-78, would have amounted to $10.68 per hundred dollars of assessed value.

The situation remained unchanged until August 1980, when the California Supreme Court ruled that the Proposition 13 tax-rate limitation did not apply to real or personal property on the 1978-79 unsecured roll. Board of Supervisors v. Lonergan, 27 Cal.3d 855, 616 P.2d 802, 167 Cal.Rptr. 820 (1980), cert. denied, 450 U.S. 918, 101 S.Ct. 1362, 67 L.Ed.2d 344 (1981). The Board interpreted Lonergan as rendering improper its application of the Proposition 13 tax-rate limitation to private railroad cars for fiscal year 1978-79. ⁴ Therefore, in October 1980, the Board recalculated the tax on private railroad cars for 1978-79, this time using the rate of $10.68 per hundred dollars of assessed value--the rate the Board would have initially applied had it not believed Proposition 13 to be controlling. The Board levied and attempted to collect from the Companies an additional tax equal to the difference between the tax computed at the $10.68 rate and the tax previously paid at the $4.85 rate.

The Companies sued to enjoin the Board from collecting this additional tax on the ground that the additional tax discriminated against owners of rail-transportation property in violation of 49 U.S.C. Sec. 11503. The district court granted the Companies' motion for preliminary injunction, and the Board filed this appeal.

On appeal, the Board argues that the district court erred in granting the preliminary injunction because (1) the alleged discriminatory tax was imposed before the effective date of Sec. 11503; (2) Sec. 11503 does not authorize a district court to enjoin tax-rate discrimination; (3) there was no tax-rate discrimination; and (4) the necessary preconditions for the grant of a preliminary injunction have not been met.

II. Discussion

A. Application of Sec. 11503

The 4-R Act was passed in 1976, but the effective date of Sec. 11503 was postponed for three years to February 1979. Pub.L. No. 94-210, Sec. 306, 90 Stat. 31, 54 (1976). The assessment of the Companies' property on which the additional tax is based was made in 1978, several months before the effective date of Sec. 11503. The Board, however, tried to collect this additional tax in 1980, after the effective date of Sec. 11503. Since Sec. 11503(b) prohibits not only assessments which discriminate against rail-transportation property, but also the collection of taxes based on discriminatory tax rates, Sec. 11503 appears clearly to apply to the Board's collection of the additional tax.

The Board puts forth a creative argument in an attempt to avoid the application of Sec. 11503. It argues that since the additional tax is based on assessments made in 1978 and is intended merely to correct its mistaken calculation of taxes owed for that year, the additional tax should relate back to 1978 and thus be deemed to have been imposed before the effective date of Sec. 11503.

The Board's relation-back argument is not persuasive. Congress' purpose in postponing the effective date of Sec. 11503 was to afford the states sufficient time to comply with the statute's prohibition against discriminatory tax treatment of railroad property. H.R.Rep. No. 725, 94th Cong., 1st Sess. 76 (1975). It was not to provide states with an additional opportunity to impose and collect discriminatory taxes. Allowing the additional tax to relate back to 1978 and thus escape the application of Sec. 11503 not only would subvert Congress' purpose in postponing the statute's effective date, but also would run counter to the basic policy of Sec. 11503 to prohibit discriminatory taxation of railroad property. ⁵

B. Power to Enjoin Tax-Rate Discrimination

Whether a district court has jurisdiction under Sec. 11503 to enjoin the use of a discriminatory tax-rate presents a sticky exercise in statutory interpretation. Subsection (b) of Sec. 11503 prohibits, among other things, the discriminatory assessment of rail-transportation property and the levy or collection of a tax based on discriminatory tax rates. The first sentence of subsection (c) then grants the district court jurisdiction to prevent a violation of subsection (b). But the second sentence of subsection (c) provides that "[r]elief may be granted under this subsection only if the ratio of assessed value to true market value of rail transportation property exceeds by at least 5 percent, the ratio of assessed value to true market value of other commercial and industrial property in the same assessment jurisdiction." (Emphasis added.) Under a narrow, literal reading of Sec. 11503, it would appear that, while tax-rate discrimination constitutes a violation of the statute, injunctive relief can only be granted if the tax-rate discrimination is accompanied by an assessment-ratio discrimination of at least 5 percent.

A statute, however, should not be interpreted so narrowly as to defeat its obvious intent. In interpreting a statute, the court's objective should be to ascertain congressional intent and give effect to legislative will. Philbrook v. Glodgett, 421 U.S. 707, 713-14, 95 S.Ct. 1893, 1898, 44 L.Ed.2d 525 (1974); United States v. American Trucking Associations, Inc., 310 U.S. 534, 542, 60 S.Ct. 1059, 1063, 84 L.Ed. 1345 (1940).

The purpose of Sec. 11503 is "to eliminate the long-standing burden on interstate commerce resulting from discriminatory State and local taxation of common and contract carrier transportation property." ⁶ Congress recognized that discrimination against rail-transportation property can result from either assessment variation or tax-rate variation. S.Rep. No. 1085, 92d Cong., 2d Sess. 5 (1972); S.Rep. No. 630, 91st Cong., 1st Sess. 3 (1969). It thus drafted Sec. 11503 to prohibit the discriminatory use of either of these methods. Congress also believed that a federal court remedy for carriers subject to discriminatory taxation was necessary because state courts were not providing them with a plain, speedy, and efficient remedy. S.Rep. No. 1085, 92d Cong., 2d Sess. 4-5 (1972); S.Rep. No. 630, 91st Cong., 1st Sess. 6-7 (1969). It thus included in Sec. 11503 a procedural component which authorizes victims of discrimination to seek injunctive relief in federal court.

Given the basic concerns motivating...