Source: https://www.chanrobles.com/usa/us_supremecourt/260/519/case.php
Timestamp: 2020-08-10 21:30:23
Document Index: 655526626

Matched Legal Cases: ['§ 266', '§ 266', '§ 28', 'arte 74', '§ 28', '§ 28', '§ 28', '§ 28', '§ 82', '§ 82']

US Supreme Court Decisions On-Line> Volume 260 > SOUTHERN RY. CO. V. WATTS, 260 U. S. 519 (1923)
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3. The ad valorem taxes imposed on complainant railroads, through an application of the unit rule of assessment, under the Revaluation Act of North Carolina, Public Laws 1919, c. 84, do not violate the Due Process or the Commerce Clauses of the Federal Constitution chanrobles.com-red
289 F.3d 1 affirmed.
Appeals from decrees of district courts, under Jud. Code § 266, denying interlocutory injunctions in suits by divers railroad companies to enjoin collection of taxes in North Carolina. chanrobles.com-red
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 § 266 of the Judicial Code 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 violate 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 chanrobles.com-red
The controversy arose in this way. [Footnote 1] By the Constitution of North Carolina, taxation of real and personal property must be uniform and ad valorem "according to chanrobles.com-red
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, c. 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. [Footnote 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 railroads were made under that act, and were approved by the legislature in August, 1920. Public Laws 1920, c. 1. Through these revaluations, the assessments of railroad property were, on the average, doubled as compared with the assessments prevailing in 1919, [Footnote 3] and chanrobles.com-red
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 percent 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 I.C.C. 220, raising freight rates in North Carolina 25 percent and passenger rates 20 percent over those prevailing when the revaluation of 1920 chanrobles.com-red
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 c. 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 § 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. chanrobles.com-red
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 § 28a, of the Act of 1921, reduced real estate valuations quite generally, but that the state board, acting under § 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. This may be true, although the discrimination is practiced through the action of different officials. Greene v. Louisville & Interurban R. Co., 244 U. S. 499. But, unless it is shown that the undervaluation was intentional and systematic, unequal assessment will not be held to violate the equality clause. Sunday Lake Iron Co. v. Wakefield, 247 U. S. 350, 247 U. S. 353; Chicago, Burlington & Quincy Ry. Co. v. Babcock, 204 U. S. 585; Courter v. Louisville & Nashville R. Co., 196 U. S. 599; Sioux City Bridge Co. v. Dakota County, ante, 260 U. S. 441. Plaintiffs have clearly failed to establish that there was intentional and systematic undervaluation by the county boards. Strong evidence to the contrary is furnished by the fact that, in 33 counties, including those in which the largest cities are located, no reduction was made in the valuation of real estate, and that, in the remaining 67 counties, the reduction varied from 1 to 50 percent. Plaintiffs have failed likewise in showing systematic refusal on the part of the state board to allow a proper reduction in the valuation of any railroad. The further contention that, by reduction of the Norfolk & Southern's assessment, the other plaintiffs were discriminated against is also unfounded. chanrobles.com-red
The claim that the railroads' property taxes are void under the statutes of the state seems to rest, in the main, on the charge that, in valuing them in 1920 and in passing upon the application for reduction under the Act of 1921, the state board failed to follow the method of valuation prescribed. It is argued, among other things, that there was no separate assessment of tangible and intangible property, or, if so, that plaintiffs were not notified as to what that separation was; that there was no due consideration of the actual cost of replacement of the property, with just allowance for depreciation of rolling stock; that chanrobles.com-red
Another answer to plaintiffs' contention is that mere failure to follow methods of valuation referred to in earlier statutes could not, in any event, render illegal the revaluation made by the state board in 1920, since it was, by the Revaluation Act, made tentative merely. That tentative valuation became an assessment by the legislature, and, hence the law, through approval by c. 1, Laws Extra Session 1920, which made it the assessment for the next four years. The state board, when applied to in 1921, had power to reduce the statutory assessment, but in acting on the applications, it was not, chanrobles.com-red
The railroad franchise tax, equal to one-tenth of one percent of the value of the company's property within the state, is imposed wholly for the support of the state government. Such taxes are expressly authorized by the state constitution, Article V. Before 1920, the contribution of railroads toward the expenses of the state government was made partly by a small privilege tax, dependent on gross earnings per mile, partly from a percentage of the ad valorem property tax paid by them, and in valuing railroad property there was included among the intangibles what is frequently called the franchise or the corporate excess. In 1920, this mileage privilege tax was abolished; payment for general state purposes of a percentage of the property tax was discontinued, and by § 82 (6 1/2) of c. 1, Laws Extra Session 1920, and Revenue Act chanrobles.com-red
The remaining objections to the franchise taxes relate merely to the amounts at which they are calculated. It is insisted that § 82 (3 1/2) of the Revenue Act of 1921 applies, and that therefore, upon the facts stated, the tax should be for one-twentieth, not for one-tenth, of one percent of the value of the company's property within chanrobles.com-red