KING COUNTY, WASH., et al. v. NORTHERN PAC. RY. CO.

KING COUNTY, WASH., et al. v. NORTHERN PAC. RY. CO. (Circuit Court of Appeals, Ninth Circuit. May 13, 1912.) No. 2,065. 1. Taxation (| 60S) — Remedies Against Wrongful Enforcement — In.tuncTION. A court of equity lias jurisdiction of a suit to enjoin tlie collection of a tax, where it is alleged that the tax is illegal, and throw's a cloud upon the title of real property, and its enforcement will produce irreparable injury because a portion of it when collected will be paid over to the state, and no action can be maintained for its recovery. [Ed. Note. — For other cases, see Taxation, Cent. Dig. §§ 1230-1211; Dee. Dig. § 608.] 2. Taxation (§ 60S) — Remedies Against Wrongful Enforcement — Injunction — Equities. The collection of a tax will not be enjoined on account of disregard of statutory requirements in the process of assessing property which aro not of such a nature as to affect the substantial justice of the tax itself or work irreparable Injury to the rights of complainant, and it is not ground for an injunction to restrain the collection of the tax imposed by a eouniy on the property of a railroad company that the assessment on complainant’s properly was raised by order of the Board of Tax Commissioners of the state in that county alone, where it appears that, as made, it was" not higher than other classes of property were assessed in the county, and was only a percentage of actual value, whereas the statute required its assessment at full value. [Ed, Note. — For other cases, see Taxation, Cent. Dig. §§ 1230-1241; Dec. Dig. § 608.] 3. Commerce (§ 69) — Franchise Tax on Railroad Company — Interstate, Commerce. A franchise tax imposed locally on a railroad doing an interstate business is invalid, as a burden on interstate commerce. [Ed. Note. — For oilier cases, see Commerce, Cent. Dig. §§ 100, 113-119; Dec. Dig. § 69.] Appeal from the Circuit Court of the United States for the Northern Division of the Western District of Washington. Suit in equity by the Northern Pacific Railway Company against King County, Wash., and others. Decree for complainants, and defendant appeals. Reversed. The appellee filed its bill to enjoin, tbe appellants from proceeding to collect a tax levied upon its roadbed and operating property by tbe county board of equalization of King county in tbe year 1907. Tbe injunction was sought, on the ground that tbe tax was illegal and in conflict with the statutes of tbe state. The bill alleged that tbe State Board of Tax Commissioners in January, 1906, classified the different railroad properties of tbe state for tbe purpose of assessment and taxation for tbe years 1906 and 1907, and that it did fix tbe valuation and assessment for tbe purposes of taxation of different classes of railway tracks as follows: All railway tracks classified as first class at $14,520 per mile; all railway tracks classified under first class B at $10,560 per mile; all tracks classified as second class at $7,920 per mile; all railway tracks of third class at $4,752 per mile; all railway tracks of fourth class at $2,112 per mile, and all railway tracks classified as second track at $7,920 per mile. Tbe bill further alleged that tbe Board of Tax Commissioners gave tbe various county assessors of tbe state advice and direction to place the said valuation upon the property of railroad companies for assessment purposes, and that those directions were followed throughout tbe state in the year 1906. Tbe bill then alleges that for tbe purposes of assessment and taxation for tbe year 1907 tbe county assessor of King county listed tbe appellee’s lines of tracks at the. valuation as equalized by the county board of equalization in the year 1906, but that in the month of August, 1907, tbe board of equalization of King county, acting at tbe instance and direction of one of tbe members of said Board of Tax Commissioners, who claimed to represent the board, raised tbe valuation of tbe assessment so fixed in tbe year 1906 for the years 1906 and 1907 to $25,410 per mile for first-class railroad tracks, and made similar increase of assessment on other classes of tbe appellee’s property, and that this was done against tbe protest of tbe appel-lee, which was duly made to said board of equalization. Tbe bill alleges that the Board of Tax Commissioners did not give directions to any other assess- or or board of equalization in any other county of tbe state than Iiing county in 1907 to raise the valuation as fixed in 1906, and that, as tbe result thereof, tbe value of tbe lines of the track of tbe appellee was not proportioned among tbe several counties through which its road passes in the proportion that tbe mileage of each county bears to tbe entire mileage of tbe state. It was further alleged in thé bill that the property of the appellee bad been overvalued in tbe assessment complained of, as compared with tbe assessment and valuation of other property in King county; that tbe appellee’s property bad been assessed at SO per cent, of its value, whereas other property bad been assessed at but 25 per cent, of its value. This ground for relief was subsequently abandoned, and counsel for the appellee withdrew from consideration in tbe case that feature of the bill. A separate ground of relief alleged was that for tbe year 1907 tbe assessor of King county assessed tbe appellee’s operating franchise, and placed a valuation thereon of $100,000 as an assessment against its personal property, whereas'the same had been covered by, and formed a part of, the valuation fixed and assessed upon tbe operating property of tbe appellee, tbe result whereof was double taxation upon tbe appellee’s property. Tbe appellee alleged due tender of taxes on its property in King county as it bad been assessed for tbe year 1906. The answer denied that tbe classification made by tbe Board of Tax Commissioners in January, 1906, was made for any other than that year, and it alleged that tbe county board of equalization of King county, in the month of August, 1907, acting at tbe instance and direction of tbe State Board of Tax Commissioners, raised tbe valuation of tbe assessment for tbe year 1907 on all rights of way and substructures and superstructures of tbe appellee situate in King county. Upon tbe issues and the testimony, tbe court enjoined tbe appellants from further proceeding to collect the tax, and directed that tbe appellants issue to tbe appellee upon the payment of the sum tendered a receipt in full for all taxes for the year 1907. Section 2, art. 7, of tbe Constitution, required that tbe Legislature shall provide by law a uniform and equal rate of assessment and taxation of all property in the state, according to its value in money, and shall prescribe such regulation by general laws, as shall secure a just valuation for taxation of all property, so that every person and corporation shall pay a tax in proportion to the value ol Ms, or her, or its property. The Revenue Act of 1897 (Raws 1897. p. 150), in section 32, provides as follows: “The value of the railroad track shall be listed and taxed in the several counties in the proportion that the value of the main line in such county bears to the whole length of the road in the state, except the value of the side or second tracks and all turnouts, and all station houses, depots, machine shops or other buildings belonging to the road, which shall be taxed in the county in which the same are located.’’ Section 34 provides that “the rolling stock shall he listed in the several counties in the proportion that the length of the main track used or operated in said county bears to the whole length of the whole road used or operated by such person, company, or corporation.” Section 42 provides that “all property shall be assessed at its true and fair value in money. In determining the true and fair value of real or personal property, the assessor shall not adopt a lower or different standard of value because the same is to serve as a basis of taxation.” By the Laws of 1905 a Board of Tax Commissioners was created. Laws 1905, p. 224. Subdivision 2 of section 2 provides that the commissioners “shall have power, and it shall be their duty to exercise general supervision over assessors and county boards of equalization, and the determination and assessment of the taxable property in the several counties, cities and towns of the state, to the end that all taxable properly in this state shall be placed upon the assessment rolls and equalized between persons, corporations and companies in the several counties of this state, and between the different municipalities and counties therein, so that equality of taxation shall be secured according to the provisions of existing laws.” John F. Murphy and Robert H. Evans, both of Seattle, Wash., for appellant. Geo. T. Reíd, J. W. Quick, R. B. da Ponte, all of Tacoma, Wash., and C. H. Winders, of Seattle, Wash., for appellee. Before GILBERT and ROSS, Circuit Judges, and WOLVER-TON, District Judge. For other cases see same topic & § NUmbeb in Dec. & Am. Digs. 1907 to date, & Kop’r Indexes * [MAJORITY — GILBERT, Circuit Judge] GILBERT, Circuit Judge (alter stating the facts as above). We find no error in the ruling of the trial court that the case was of equitable cognizance. In Dows v. City of Chicago, 11 Wall. 108, 20 L. Ed. 65, it was said: “A suit in equity will not lie to restrain the collection of n tax on the sole ground that it is illegal. There must exist, In addition, special circumstances bringing the case under some recognized head of equity jurisdiction, such as that the enforcement of the tax would lead to a multiplicity' of suits, or produce irreparable injury, or, where the property is real estate, throw a cloud upon the title of the complainant.” It is not alleged here that there are any special grounds of equitable jurisdiction except the fact that the enforcement of the assessment would throw a cloud upon the title of the appellee’s property. In Ogden City v. Armstrong, 168 U. S. 224, 18 Sup. Ct. 98, 42 L. Ed. 444, the doctrine was reaffirmed that a court of equity will interfere to enjoin an illegal tax which will create a cloud upon title to real property. Nor is the case one in which there is an adequate remedy at law. The contention that the appellee may pay the tax and thereafter recover it in an action at law does not suggest an adequate remedy, nor, indeed, any remedy at all as to a portion of the tax, for a portion of it goes to the state, and no action may be brought against the state to recover the same. Raymond v. Chicago Traction Co., 207 U. S. 20, 28 Sup. Ct. 7, 52 L. Ed. 78, 12 Ann. Cas. 757. In the case of Great Northern R. Co. v. Snohomish County, 48 Wash. 478, 93 Pac. 924, the Supreme Court of the state held that the act creating the Board of Tax Commissioners gave them general supervision over assessors and county boards of equalization in the matter of assessment of property lying in different counties of the state. In that case the county assessor of Snohomish county had disregarded the instruction of the State Tax Commission, and had assessed railway property within that county at a higher rate than that adopted in the other counties by order of said commissioners, and the court said: • “Tlie acts of the Snohomish county officials in disregard of the lawful orders and directions of their superior officers were void and of no effect.” The case was before the court on a demurrer to the complaint. It was subsequently again before the court on the merits in Great Northern R. Co. v. Snohomish County, 54 Wash. 23, 102 Pac. 881, where further discussion was had of the law applicable to the case. It is contended that the decisions in those two cases are decisive of the questions involved in the case at bar. There is this difference, however, in the issues which were there presented and those which are now before this court: In that case the court assumed that the property of the railroad company had been assessed as high as other property, and the fact which controlled decision was that the county assessor in Snohomish county had disregarded the instructions of the Board of Tax Commissioners, and had increased the assessment in that county. In the present case the board of equalization of King county followed and obeyed the instructions of the Board of Tax Commissioners. It is true that the officers of the other counties received no such instruction, but the irregularity of the proceedings consists not so much in the fact that the assessment in King county was increased, as it does in the fact that the assessments in the other counties were not increased proportionately thereto. We are not primarily concerned, however, with what was done in those counties. The question here is, Was the action of the board of equalization of King county, which was done in pursuance of authority from the Board of Tax Commissioners, rendered void by the fact that that board om'itted to give like instructions to other county officials? The appellee comes into a court of equity seeking relief against a tax by which, according to the allegations of its bill, its property was assessed at but 30 per cent, of its value, in the face of a statute which required that it be assessed at its full value. By the proofs in the case it is established beyond dispute that other property in King county was assessed as high as 60 per cent, of its full value, and that the appellee’s property by the assessment which is complained of was still underassessed as compared with other property in the county. If the Board of Tax Commissioners had required the boards of equalization of all the other counties through which the appellee’s road extends to raise their assessments proportionately, confessedly the ap-pellee would have had no ground for complaint against the tax of 1907. But it is said that the assessment made by the board of equalization in King county was illegal, not because the appellee’s property was overassessed in that county, but because its road was not assessed in the same proportion in the oilier counties. The statute which requires that all property shall be assessed at its full fair value is certainly not less authoritative than the statute which requires that the value of the railroad track shall be assessed proportionately in each county. It being established that the tax on the appellee’s property in King county is not unjust or inequitable, and is not greater than the appellee, ought to pay, we are unable to see where there is ground for its application to a court of equity for relief. In State Railroad Tax Cases, 92 U. S. 613, 615, 23 L. Ed. 663, Mr. Justice Miller said: “A court of equity is therefore hampered in the exorcise of its jurisdiction hy the necessity of enjoining the tax complained of in whole or in part, without any power of doing complete justice by making, or causing to be made, a new assessment on any principle it may decide to be the right one. In this manner it may, by enjoining the levy, enable the complainant to escape wholly the tax for the period of time complained of, though it be obvious that he ought to pay a tax, if imposed in the proper manner'.” It is well settled that the collection of a tax will not be enjoined on account of disregard of statutory requirements in the process of assessing property, “which are not of such a nature as to affect the substantial justice of the tax itself, or work irreparable injury to the rights of the complainant.” 37 Cyc. 1262; Mercantile Nat. Bank v. Hubbard (C. C.) 98 Fed. 465, affirmed in 186 U. S. 458, 22 Sup. Ct. 908, 46 L. Ed. 1247, sub nom. Lander v. Mercantile Bank; Kansas City, Ft. S. & M. R. Co. v. King. 120 Fed. 614, 57 C. C. A. 278; Hixon v. Oneida County, 82 Wis. 515, 52 N. W. 445; McCrory v. O’Keefe, 162 Ind. 534, 70 N. E. 812; Ryan v. Commissioners of Leavenworth County, 30 Kan. 185. 2 Pac. 156; Albany & Boston Min. Co. v. Aud. Gen., 37 Mich. 391; Wagoner v. Loomis, 37 Ohio St. 571; Welch v. Clatsop County. 24 Or. 457, 33 Pac. 934. In Albany City Nat. Bank v. Maher (C. C.) 6 Fed. 417, Judge Wallace said: •‘In dealing with the rights of parties to resist taxation, courts of equity proceed upon considerations quite unknown to courts of law, and hold, not only that it must appear the tax is one unlawfully imposed, but also one that justice and good conscience do not require the party to pay.” In paying the tax which has been assessed against it in King county, the appellee will pay no more than its just proportion of the public burdens. King county in collecting it will receive no more than what, under the law had it been complied with, it is entitled to receive. As the resort is to a court of equity, the appellee must show itself entitled to relief which accords with equity and good conscience. This it has failed to do, for it has not shown that any unjust burden is sought to be imposed upon it. We find no error in the decree of the court below so far as it afforded relief against the assessment on the franchises of the appel-lee. Western Union Tel. Co. v. Kansas, 216 U. S. 1, 30 Sup. Ct. 190, 54 L. Ed. 355. The decree is reversed as to all thereof excepting the relief awarded against the tax on the franchise of the appellee, and the cause is remanded to the court below, with instructions to enter a decree accordingly.