Court Opinion

ID: 7219279
Source: CourtListenerOpinion
Date Created: 2022-07-25 03:46:20.467553+00
Date Added: 2024-06-11T16:17:09.959678
License: Public Domain

CUSHMAN, District Judge
(concurring in denial of interlocutory injunction).
It is necessary to add but little by way of statement to that contained in the majority opinion to make clear my conclusion in these cases.
The statute attacked, chapter 191 of the Washington Laws of 1933, p. 869 (Remington’s Revised Statutes of Washington, § 8326 —1 et seq.) makes provision for the imposition of a tax for the privilege of engaging in business activities within the state of Washington, the same being based upon the gross income from such business, in the ease of steam railways in the amount of 1% per cent, and in the case of electric interurban railways .5 per cent. Section 2 (1) (e) and section 2 (2) (e), 3, 4, chapter 191, Laws of 1933, Remington’s Revised Statutes of Washington, § 8326 — 2 (1) (e) and § 8326 — 2 (2) (e), 3, 4).
In computing such tax it is provided, by section 5 of the act (Rem. Rev. Stat. § 8326 — 5), that there shall be excepted from gross income so much thereof as is derived from business which the state of Washington is prohibited from taxing under the Constitution of this state or the Constitution or laws of the United States.
By section 31 of the act it is provided: “See. 31. This act is necessary for the immediate support of the state government and its existing public institutions and shall take effect immediately.”
It is complained that: “Defendants construe said act as not applying to a percentage of gross income from plaintiff’s interstate business, but contend that the same applies to the gross income from plaintiff’s intrastate business, including revenue received by the plaintiff from the United States Government for the transportation of United States mail, and that plaintiff owes and must pay 1% percent of said gross income from intrastate business and from the transportation of the United States mails within the State of Washington for the privilege of doing intrastate business .in this state.”
Upon the hearing the Assistant Attorney General disclaimed for the defendants any interpretation of this statute imposing a tax on any income derived from the carrying of the United States mails. Nothing in support of this bald allegation was offered, and it should be disregarded _both upon the application for interlocutory injunctions and the motions to dismiss.
The Supreme Court of the state of Washington has recently considered this law and held the act not to offend against either the Federal or the State Constitutions. State ex rel. Stiner v. Yelle (Wash.) 25 P.(2d) 91.
Any tax paid by complainants is properly to be taken into account in fixing intrastate rates. Citation of authority is not considered necessary. There has been no showing, either in the bills of complaint or affidavits in support of the motions for inter*760lpeutory injunctions, why complainants are prevented, by an adjustment of their rates, in making provision for the payment of this tax. Gregg Dyeing Co. v. Query, 286 U. S. 472-477, 52 S. Ct. 631, 76 L. Ed. 1232, 84 A. L. R. 831. The analogy in this matter of shipper and consumer is not a dangerous one.
The bills of complaint make no disclosure as to income and expense other than for the years 1932 and 1933. It was stated, in effect, upon the hearing, and not disputed, that no application had been made under the Public Service Commission Law to increase rates.
In Ohio Tax Cases, 232 U. S. 576-590, 34 S. Ct. 372, 375, 58 L. Ed. 737, a case wherein a statute of Ohio (which imposed a tax upon the gross intrastate earnings of certain railroads, corporations of that state) was attacked upon the ground that interstate commerce was burdened, it was stated: “Nor do we think that from the facts of the present case it is to be inferred that the franchises of plaintiffs in error are valueless merely because it appears that the present earnings of the railroads are not sufficient to pay more than can be derived from legitimate high-grade investment securities that are readily available on the market, or (in the case of one of the roads) are not even sufficient to pay operating expenses. Upon this point we are content to refer to, without repeating, the language employed by Mr. Justice Miller, speaking for this court in State Railroad Tax Cases, 92 U. S. 575, 606, 23 L. Ed. 663, 670.” (Italics now supplied.)
Attempt has been made to distinguish'the foregoing decision upon the ground that the railroads involved in that ease were Ohio corporations. While the state of Washington would have no right to exclude such corporations as complainants, being engaged in interstate commerce, from the state, yet it dees have the right to impose a tax on foreign corporations for the privilege of doing business in the state. Citation of authority in support of the foregoing is deemed unnecessary. There is no reason for contend1 ing that the interstate commerce carriage by a domestic corporation can he burdened as the result of a state law, and that carried by foreign corporations cannot. Northern Securities Co. v. United States, 193 U. S. 197, 24 S. Ct. 436, 48 L. Ed. 679; State Constitution of Washington, article 12, § 7.
It has been contended on behalf of com-' plainants that the determination of these causes is controlled by the decision of the Supreme Court in Colorado v. United States, 271 U. S. 153, 46 S. Ct. 452, 453, 70 L. Ed. 878. That was a ease wherein the court upheld the action of the Interstate Commerce Commission in authorizing abandonment, both as respects interstate and intrastate traffic, of a branch line of railroad lying wholly within the state of the owning company’s incorporation, upon the ground that local conditions were such that public convenience and necessity did not require continued operation, and that such operation would result in large deficits constituting .an undue burden upon interstate commerce. This contention of complainants is unwarranted, as shown by the following from that opinion:
“The certificate [of the Interstate Commerce Commission] was granted on the ground that the local conditions are such that public convenience and necessity do not require continued operation; that for years operation of the branch had resulted in large deficits; that future operation would likewise result in large deficits; that the operating results of the branch are reflected in the company’s accounts; that it would have to make good the deficits incurred in operating the branch; and that thus continued operation would constitute an undue burden upon interstate commerce. Abandonment of Branch Line by Colorado & Southern Ry., 72 I. C. C. 315; Id.; 82 I. C. C. 310; Id., 86 I. C. C. 393.
“The application for the certificate was filed September 1,1921. Before any hearing thereon, the state moved that the proceeding he dismissed on the ground, among others, that, as the branch was wholly intrastate, the Commission was without jurisdiction of thq application. This objection was overruled. Thereafter the state opposed, on the merits, the granting of the certificate. The case was first heard before division 4 of the Commission on exceptions filed by the company to the examiner’s proposed report. On July 28, 1922, the application was denied, with leave to renew it ‘if the improvement in operating results, confidently anticipated by protestants, should not materialize.’ 72 I. C. C. 315. On May 19, 1923, the company filed a petition praying that the ease be reopened and set for'1 further hearing. Division 4 heard it. On September 24, 1923, an order was entered that the certificate issue. 82 I. C. C. 310. A hearing before the full Com-' mission was then sought by the State and the other protestants. Compare United States v. Abilene & Southern Ry. Co., 265 U. S. 274, 281, 44 S. Ct. 565, 68 L. Ed. 1016. The request was granted. On: February 11, 1924, the order was affirmed with the modification *761that the certificate should not take effect until six months from that date. 86 I. C. C. 393. The effective date of the certificate was later extended to September 11, 1924, and finally to October 11, 1924. 94 I. C. C. 657, 661.
“Meanwhile, this suit had been begun. The Commission and the company intervened as defendants. On August 19,1924, a decree dismissing the bill on the merits was entered, upon final hearing, without opinion. A motion for a suspension of the order of the Commission pending an appeal was denied. The ease is here on direct appeal under the Act of October 22, 1913, e. 32, 38 Stat. 208, 220. The order is assailed as void in so far as it authorizes abandonment and discontinuance of operation in , intrastate traffic. The remedy pursued is the appropriate one. See Texas v. Eastern Texas R. R. Co., 258 U. S. 204, 42 S. Ct. 281, 66 L. Ed. 566.
“First. The main contention of the state is that the Commission lacks power to authorize the Company to abandon, as respects intrastate traffic, a part of its line lying wholly within the state. The argument is this: While a railroad cannot, in the absence of express statutory provision or contract, be compelled by a state to continue operating its lines at a loss when there is no reasonable prospect of future profit, and may, therefore, without such consent, abandon all lines within the state (Brooks-Scanlon Co. v. Railroad Commission, 251 U. S. 396, 40 S. Ct. 183, 64 L. Ed. 323; Bullock v. Florida, 254 U. S. 513, 520, 41 S. Ct. 193, 65 L. Ed. 380; Railroad Commission v. Eastern Texas R. R. Co., 264 U. S. 79, 85, 44 S. Ct. 247, 68 L. Ed. 569), it has no right to abandon a part of the lines, merely because operation will be attended by pecuniary loss, and still continue to enjoy the privilege of operating other parts within the state (Chesapeake & Ohio Ry. Co. v. Public Service Commission, 242 U. S. 603, 37 S. Ct. 234, 61 L. Ed. 520; Fort Smith Light & Traction Co. v. Bourland, 267 U. S. 330, 45 S. Ct. 249, 69 L. Ed. 631).” (Italics now supplied.)
In the ruling of the Interstate Commerce Commission of July 28, 1922, to whieh reference is made by the Supreme Court, it is recited as follows (72 I. C. C. 315-318): “A statement submitted by the applicant covering operations, of the branch line from January 1, 1916, to November 30, 1921, shows operating revenues, $80,603.50; operating expenses, $185,912.74; taxes, $106,-716.87; interest. $145,550; total deficit, $357,576.11. It thus appears that over 70 per cent of the total deficit consists of charges to interest and taxes. The branch line is subject to applicant’s first mortgage, under which bonds to the principal amount of $19,-400,000 are outstanding, and to its refunding and extension mortgage, under whieh bonds are outstanding to the principal amount of $28,978,900. ^ * * ”
The present economic emergency is not confined to the state of Washington, but is evidenced by executive aetion and recent acts of Congress as well. Emergency Railroad Transportation Act of 1933, § 2 (title 49 US CA § 252) is, in part, as follows: “In order to foster and protect interstate commerce in relation to railroad transportation by preventing and relieving obstructions and burdens thereon resulting from the present acute economic emergency, and in order to safeguard and maintain an adequate national system of transportation, there is hereby created the office of Federal Co-ordinator of Transportation, who shall be appointed by the President, by and with the advice and consent of the Senate, or be designated by the President from the membership of the Commission. * * * ” (Italics now supplied.)
Upon consideration of the emergent nature and limited duration of this legislation (Block v. Hirsh, 256 U. S. 135, 41 S. Ct. 458, 65 L. Ed. 865, 16 A. L. R. 165), as disclosed by section 31 of the act (Session Laws of 1933, c. 191, § 31, p. 897), the meager disclosure concerning income and expense made by complainants’ bills and affidavits and the changes recently made by the people of the United States as to sources of revenue and by the Legislature in the tax laws of the state, whieh not only effect a reduction in the ad valorem taxes of complainants (chapter 4, § 1, Laws of 1933, p. 47), but substantially increase the taxes of their competitors (sec. 2 (1) (e), (2) (e) 11, chap. 191, Laws of 1933, Remington’s Revised Statutes of Washington, section 8326 — 2, (1) (e), (2) (e) 11, and section 28, chapter 166, Laws of 1933, Remington’s Revised Statutes of Washington, § 6381 — 28), the court should not undertake to determine what it is asked to do by the bills of complaint. Complainants’ case is based upon the presumption that future results will be similar to those already experienced, but such presumption cannot be indulged where there have been so numerous, radical, and far-reaching changes. When such a presumption obtains it depends upon the existence and continuance of the applicable precedent conditions. Any determination now reached, it is clear, would be *762based upon little more than conjecture and speculation.
The interlocutory injunctions in these causes should, in my opinion, not only be denied, but the bills of complaint dismissed.
The clerk is directed to notify the attorneys in these suits of the foregoing.