Source: https://caselaw.findlaw.com/us-supreme-court/201/245.html
Timestamp: 2019-04-19 19:30:41+00:00

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'Sec. 10. The state may continue to collect all specific taxes accruing to the treasury under existing laws. The legislature may provide for the collection of specific taxes from banking, railroad, plank road, and other corporations hereafter created.
'Sec. 11. The legislature shall provide a uniform rule of taxation, except on property paying specific taxes, and taxes shall be levied on such property as shall be prescribed by law.
'Sec. 12. All assessments hereafter authorized shall be on property at its cash value.
'Sec. 13. The legislature shall provide for an equalization by a state board in the year one thousand eight hundred and fifty-one, and every fifth year thereafter, of assessments on all taxable property except that paying specific taxes.
'Sec. 10. The state may continue to collect all specific taxes accruing to the treasury under existing laws. The legislature may provide for the collection of specific taxes from corporations. The legislature may provide for the assessment of the property of corporations, at its true cash value, by a state board of assessors, and for the levying and collection of taxes thereon. All taxes hereafter levied on the property of such classes of corporations as are paying specific taxes under laws in force on November sixth, A. D. nineteen hundred, shall be applied as provided for specific state taxes in 1 of this article.
'Sec. 11. The legislature shall provide an uniform rule of taxation, except on property paying specific taxes, and taxes shall be levied on such property as shall be prescribed by law: Provided, That the legislature shall provide an uniform rule of taxation for such property as shall be assessed by a state board of assessors, and the rate of taxation on such property shall be the rate which the state board of assessors shall ascertain and determine is the average rate levied upon other property upon which ad valorem taxes are assessed for state, county, township, school, and municipal purposes.
This change in the Constitution was doubtless owing to a decision of the supreme court of the state (Pingree v. Auditor General [Pingree v. Dix] 120 Mich. 95, 44 L. R. A. 679, 78 N. W. 1025), of date of April 26, 1899, holding unconstitutional an act passed in 1881 in respect to the assessment and taxation of telegraph and telephone lines. An act 19 of 1899, passed March 15, 1899, and commonly called the 'Atkinson bill,' was subject to the same objections as the [201 U.S. 245, 249] act of 1881, and was evidently regarded as equally unconstitutional. Indeed, though not directly involved in that suit, it was referred to in the opinion of Mr. Justice Montgomery.
After a full hearing upon pleadings and proofs the circuit court entered a decree dismissing the bill (138 Fed. 223), whereupon the plaintiff appealed directly to this court, under 5 of the circuit court of appeals act.
Messrs. Lloyd W. Bowers, O. E. Butterfield, Benton Hanchett, A. C. Angell, Henry Russell, and Ashley Pond for appellant.
[201 U.S. 245, 266] Messrs. Charles A. Blair, Roger Irving Wykes, Loyal E. Knappen, John E. Bird, and Charles E. Townsend for appellee.
The unconstitutionality of a statute may depend upon its conflict with the Constitution of the state or with that of the [201 U.S. 245, 291] United States. If conflict with the state Constitution is the sole gound of attack, the supreme court of the state is the final authority ( Merchants' & M. Nat. Bank v. Pennsylvania, 167 U.S. 461 , 42 L. ed. 236, 17 Sup. Ct. Rep. 829, and cases cited in the opinion); while, in the other case, the ultimate decision rests with this court. The validity of this act has not been directly presented to or determined by the state court, but the first attack by the parties interested is made in the Federal court and by this suit, and conflict with both Constitutions is alleged. Undoubtedly a Federal court has the jurisdiction, and, when the question is properly presented, it may often become its duty, to pass upon an alleged conflict between a statute and the state Constitution, even before the question has been considered by the state, and therefore of general public interest. of the act, whether springing out of the state or of the Federal Constitution, may be presented in a single suit, and call for consideration and determination. At the same time the Federal courts will be reluctant to adjudge a state statute to be in conflict with the state Constitution before that question has been considered by the state tribunals. Especially is this true when the statute is one affecting the revenues of the suate, and therefore of general public interest. Coulter v. Louisville & N. R. Co. 196 U.S. 599 -609, 49 L. ed. 615-618, 25 Sup.Ct.Rep. 342. And this reluctance becomes more imperative when the statute has been before the highest court of the state, and a decision rendered upon the assumption that it is valid, and this, although the direct question of validity was not presented nor determined.
While this case did not directly determine the constitutionality of the statute, a fair implication is that it was not regarded as obviously in conflict with the state Constitution, for in that event the court would scarcely have taken time to consider the validity of proceedings under its authority.
The first and principal matter of attack is the 'average rate.' It is contended that the fixing of the rate of taxation is a legislative function; that in ascertaining the average rate by the method described there is no exercise of the legislative judgment, but that it is determined by the action of the various local assessing and taxing boards, who, though charged with no [201 U.S. 245, 294] duty of inquiry as to the necessities of the state or the proper rate of taxation of railroad property, are in fact the only officials exercising any discretion and judgment.
There might be a question whether, even if there were a clear delegation of legislative functions to other departments of the state government, it would be void under the Federal Constitution. Whatever, in view of the distinct grant in the Federal Constitution to the President, Congress, and the Judiciary of separately the executive, legislative, and judicial powers of the nation, may be the power of Congress in the delegation of legislative functions, a very different question is presented when the restrictions of the Federal Constitution are invoked to restrain like action in a state. Crimes against the nation must be prosecuted by indictment, yet a state may proceed by information. Suppose a state, by its Constitution, grants legislative functions to the executive, or to the judiciary, what provision of the Federal Constitution will nullify the action? Will the grant work an abandonment of a republican form of government, or be a denial of due process, or equal protection?
Maine v. Grand Trunk R. Co. 142 U.S. 217 , 35 L. ed. 994, 3 Inters. Com. Rep. 807, 12 Sup. Ct. Rep. 121, 163, is worthy of consideration on this question of legislative determination. The legislature of Maine graded the rate of an excise tax imposed upon railroads by the amount of their gross transportation receipts, and provided that, when a railroad was partly within and partly without the state, the gross receipts chargeable to the road within the state should be ascertained on the mileage basis. The court below held that as the Grand Trunk Railroad was partly within and partly without the state of Maine, the imposition of the tax was a regulation of commerce, and therefore in conflict with the exclusive power of Congress over interstate and foreign commerce; and rendered judgment for the company.
See also Home Ins. Co. v. New York, supra, and cases cited in the opinion. Of course, a passenger on the Grand Trunk Railroad knew that the fare he was paying was increasing the gross receipts, and therefore indirectly affecting the amount of the tax collectible under the statute. But it was not to be assumed that he would travel and pay fare with that object in view. No more can it be assumed in the present case that the local taxing officers, although knowing that an increase in their local tax levy will increase the tax rate upon railroads, will be led by that knowledge to forget their single duty to the community for which they are acting. No one pays money for the mere sake of compelling others to pay. Some personal advantage must be intended. No more will local tax officers levy a tax upon their neighbors, those who have placed them in position, for the mere sake of increasing the tax burden upon railroads, especially when the local levy is not followed by an equal increase in the amount of the burden cast upon railroads, and but a trifling fraction of that increase inures, either directly or indirectly, to the benefit of the taxpayers of the locality. The total value of other property in Michigan subject to ad valorem taxes was, according to the record, in the neighborhood of $1,500,000,000. A tax levy in the city of Detroit for local purposes of $1,500,000 would, therefore, increase the rate of taxation on railroad property only one mill, and that increase would profit Detroit but little, as the railroad tax is appropriated for state purposes only.
It may be laid down as a general proposition that where a legislature enacts a specific rule for fixing a rate of taxation, by which rule the rate is mathematically deduced from facts and events occurring within the year and created without reference to the matter of that rate, there is no abdication of the legislative function, but, on the contrary, a direct legislative determination of the rate.
Again, it seems more reasonable that the average rate should [201 U.S. 245, 298] be fixed by this mathematical computation from the other rates already established than for the legislature to prescribe in advance that which it may hope will be such rate. In the one case the exact average is determined; in the other an estimate is made, which may turn out to be more or less than the average.
While the peculiar method of ascertaining the average rate prescribed by this statute may be new, yet the application of an average rate to the taxation of railroads in not new, nor confined to Michigan. See 1, chap. 64, Public Statutes and Session Laws of New Hampshire of January 1, 1901, section first enacted in 1878; 1 Mass. Rev. Laws (1902) chap. 12, 93, p. 227; chap. 14, 37, 40, pp. 266, 268, incl., taken from laws of 1864, 1865, and 1880; 2 Mo. Rev. Stat. (1899) 9363, 9364, pp. 2175, 2176; Wis. Laws (1903) chap. 315, 7-14, incl. pp. 496-499; Boston, c. & M. R. Co. v. State, 60 N. H. 87; State ex rel. Brown v. Missouri P. R. Co. 92 Mo. 137, 6 S. W. 862; Chicago & A. R. Co. v. Lamkin, 97 Mo. 496, 10 S. W. 200; State ex rel. Gottlieb v. Metropolitan Street R. Co. 161 Mo. 189, 199, 61 S. W. 603.
We have thus far assumed that there was equity and justice in applying to railroad property the average rate of taxation imposed upon other property. But this assumption is challenged. For instance, the Chicago & Northwestern Railroad Company's property is situate in the upper peninsula of the state of Michigan-- 'and yet the average rate of tax applied to its property depends upon, and increases with, the taxes raised on all the counties of the 'Lower Peninsula' of Michigan, and in all the cities, towns, villages, and school districts of those counties, for purely local purposes. If Detroit spends $10,000,000 for local government, the Northwestern Railway Company has to pay proportionately more tax on its property in northern Michigan than if Detroit's tax for local government were $5,000,000; and, beyond that, if Detroit spends $1,000,000 or $5,000,000 for purely domestic or private enterprises, such as [201 U.S. 245, 299] gas works, waterworks, street railways, parks, baths, libraries, etc., the Northwestern Railway's tax on its property (though wholly outside of Detroit-in the 'Upper Peninsula') is proportionately larger on that account.
But these considerations appeal mainly to the discretion of the legislature, and do not make against its power. Unless there be some specific provisions in the state Constitution compelling other action, the state may treat its entire territory as composing but a single taxing district, and deal with all property as within the district and subject to taxation accordingly. There is no magic in county organization, no inherent necessity of dividing the state into small taxing districts. Frequently railroads are separated from other property, assessed by a state board, and the taxes collected therefrom applied to the general purposes of the state. Sometimes, it is true, a portion of the taxes thus collected is distributed pro rata to the counties along the lines of the roads, but the power of the state to apply the taxes from railroad property to only state purposes cannot be doubted, and is often exercised. If it may take all the taxes received from railroad property and apply it to general state purposes, and, to that extent, relieve counties in which there is no railroad property from their contribution to the support of the state, it has equal power to say that the average rate of taxation shall be determined, not by the rates upon other [201 U.S. 245, 300] property in the immediate localities in which the railroads are located, but by those upon all property wherever situated in the state. We do not mean to hold that cases may not arise in which enforcing this method of taxation works such injustice to a railroad as to call for judicial interference. But we do hold that the mere fact that all the property in the state is taken into account in determining the average rate does not carry with it such proof of injustice and inequality as to compel the courts in all cases to strike the latter down. From the cases that are before us involving this statute it appears that there are many railroad companies in the state, and we may fairly take judicial notice of the fact that the state is traversed in almost every direction by railroads. And while it is possible that there may be a county or two without one, yet it is an exception, and to hold that for each railroad the average rate must be determined from the property in the localities immediately contiguous or through which its road passes might well introduce into the matter of taxation a confusion and inequality resulting in far greater injustice than the uniformity established by the present system.
See also Pittsburgh, C. C. & St. L. R. Co. v. Backus, 154 U.S. 421 , 38 L. ed. 1031, 14 Sup.Ct.Rep. 1114; Florida C. & P. R. Co. v. Reynolds, 183 U.S. 471 , 46 L. ed. 283, 22 Sup.Ct.Rep. 176; Coulter v. Louisville & N. R. Co. 196 U.S. 599 , 49 L. ed. 615, 25 Sup.Ct.Rep. 342.
While there may be no provision for an equalization of railroad with other property. it will be perceived that the statute names the time and place for the sessions of the assessing board, gives to any person or company interested the right [201 U.S. 245, 302] to be heard, and also authorizes the board to correct the valuation. So that it cannot be objected that the railroad companies are precluded from a full hearing on the matter of valuation; and, as has heretofore been said by this court, one hearing is sufficient to constitute due process.
Other questions are discussed by counsel in their briefs, but in view of the exhaustive and well-considered opinion of the trial judge, with the general trend of which we concur, it is unnecessary to further extend this discussion. It is sufficient to refer to that opinion for a consideration of those questions. We have noticed those which seem to us paramount and controlling.
It is charged in the bill that there was a systematic undervaluation of other property in the state, which resulted in denying to this plaintiff the equal protection of the law. The trial court found against this charge. It is enough to say that generally we accept the finding of a trial court upon a question of fact when the testimony respecting it is conflicting. It may also be said that a legislature is not bound to impose the same rate of tax upon one class of property that it does upon another. As it may exempt all of one class, so it may impose a different rate of taxation. It is sufficient if all of the same class are subjected to the same rate and the tax is administrated impartially upon them.
484. Escanaba & Lake Superior Railroad Company v. Same. 485. Grand Rapids &Y Indiana Railway Company v. Same. 486. Wisconsin & Michigan Railway Company v. Same. 487. Lake Shore & Michigan Southern Railway Company v. Same.
462. Detroit & Mackinac Railway Company v. Powers. 463. Chicago & Northwestern Railway Company v. Same. 464. Toledo, Saginaw & Muskegon Railway Company v. Same. 465. St. Clair Tunnel Company v. Same. 466. Michigan Air Line Railway Company v. Same. 467. Grand Trunk Western Railway Company v. Same. 468. Ann Arbor Railroad Company v. Same. 469. Cincinnati, Saginaw & Mackinaw Railroad Company v. Same. 470. Chicago, Detroit & Canada Grand Trunk Junction Railroad Company v. Same. 471. Munising Railway Company v. Same. 472. Lake Superior & Ishpeming Railway Company v. Same. 473. Marquette & Southeastern Railway Company v. Same. 474. Chicago, Milwaukee & St. Paul Railway Company v. Same. 475. Sault Ste. Marie Bridge Company v. Same. 476. Mineral Range Railroad Company v. Same. 477. Duluth, South Shore & Atlantic Railway Company v. Same. 478. Detroit, Grand Haven & Milwaukee Railway Company v. Same. 479. Pontiac, Oxford & Northern Railroad Company v. Same. 480. Minneapolis, St. Paul & Sault Ste. Marie Railway Company v. Same. 481. Copper Range Railroad Company v. Same. 482. Gogebic & Montreal River Railroad Company v.Same. 483. Manistee & Southeastern Railroad Company v. Same.

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