Louisville & Nashville R. Co. v. Greene,
244 U.S. 522 (1917)

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U.S. Supreme Court

Louisville & Nashville R. Co. v. Greene, 244 U.S. 522 (1917)

Louisville & Nashville Railroad Company v. Greene

Nos. 778, 779

Argued January 16-18, 1917

Decided June 11, 1917

244 U.S. 522


Greene v. Louisville & Interurban R. Co., ante, 244 U. S. 499, followed in holding: (1) that the federal court has power to decide all questions, its jurisdiction being properly invoked on federal grounds, (2) that this suit, to restrain subordinate state officers from enforcing an unlawful and discriminatory assessment made under color of a valid state law, is not a suit against the state, (3) that plaintiff has not an adequate remedy at law under § 162, Ky.Stats., (4) that unlawful discrimination in taxation resulting from general, systematic undervaluations of other property is remediable by the courts, and (5) that whether such an assessment violates the "equal protection" clause of the Fourteenth Amendment need not be decided by the federal court when full relief is grantable under the state constitution and laws.

The right to relief by injunction against unlawful discrimination by taxing officials exists in respect of state, as well as local, taxes; if what was said in Coulter v. Louisville & Nashville R. Co., 196 U. S. 599, 196 U. S. 608, imports that an injunction can under no circumstances be awarded with respect to state taxes, it must be deemed to have been overruled by Raymond v. Chicago Union Traction Co., 207 U. S. 20.

Page 244 U. S. 523

Proof comprising a body of official admissions and direct and circumstantial evidence from unimpeached public and private sources, and which fully sustains a finding that the great mass of property in Kentucky, embracing all tangible property except railroad property and distilled spirits -- during a period of years -- was systematically and notoriously assessed at not exceeding 60 percent of its fair cash value, held not overcome by general presumptions arising from the duty of assessors to assess at fair cash value, or by numerous stereotyped affidavits of former assessors asseverating their obedience thereunto.

The findings of an official body such as the Kentucky Board of Valuation and Assessment, made after a hearing and upon notice to the taxpayer, are quasi-judicial, and, in the absence of fraud, are not to be set aside or disregarded by courts unless it is made to appear that the body proceeded upon an erroneous principle or adopted an improper mode of estimating value.

Under the Kentucky law respecting the taxation of the intangible property of railroad and other public service corporations (§§ 4077-4081, Ky.Stats.), the particular method to be pursued by the Board of Valuation and Assessment in ascertaining from the evidence the value of the "capital stock" (i.e., the entire tangible and intangible property) of a railroad system, partly within and partly outside of the state, is left to the sound discretion of the Board.

In estimating the value of plaintiff's "capital stock," the Kentucky Board of Valuation and Assessment capitalized the plaintiff's income upon a 6 percent basis, and, in excluding shares held by plaintiff in other corporations owning and paying taxes on property in Kentucky, it estimated their value in the same way -- i.e., by capitalizing on a 6 percent basis the income derived therefrom. Held: (1) that this method of valuing the shares could not be held fundamentally wrong, although there was evidence that their intrinsic value was much greater than the estimate thus obtained; (2) that the adoption of the 6 percent rate instead of a higher "composite" rate based on the mileage of plaintiff's railroad in each of thirteen states and the legal rates of interest in those states, respectively, was likewise a matter for the judgment of the Board.

Section 4081, Ky.Stats., as amended by the Act of June 9, 1893, in providing that the ratio of intrastate to total mileage of any interstate railroad "shall be considered" by the Board of Valuation and Assessment in fixing the value of its corporate franchise (intangible property) liable to taxation in the state, does not require the Board to apportion the value of the railroad's property upon a strict mileage

Page 244 U. S. 524

basis, but merely to consider relative mileage, among other pertinent factors, in the process of valuing that proportion of the property which is situate within the state.

Section 4081, supra, applies to both foreign and domestic corporations, and is not to be construed as requiring the taxation of tangible assets outside of the state, which clearly, as to foreign corporations, would render it obnoxious to the due process clause of the Fourteenth Amendment.

Under § 4081, supra, the apportionment of "capital stock" to Kentucky is first made upon a mileage basis (with such allowances as may be required because of unequal distribution of tangible property within and without the state), and the value of the tangible property in the state is then subtracted and the tax computed on the difference, representing the intangible property in Kentucky.

Total assets, situate partly within and partly without a state but organically related, may be taken into consideration as a means of reaching the true cash value of the part within the state, and, in the case of a railroad, the mileage factor may be given its proper weight.

Section 4081, supra, requires the Board to take into consideration not only the mileage operated, but also the mileage controlled, by the railroad company within and without the state.

Under §§ 4079, 4081, supra, in determining the percentage apportionable to Kentucky, the whole of the controlled mileage within and without the state is to be treated as part of the aggregate "capital stock" not only in fixing the mileage, but also in fixing the valuation, upon which the apportionment is based.

To avoid double assessments, the value of so much of the controlled mileage as is within Kentucky, and therefore separately assessed in that state, should be deducted (in addition to the value of the tangible property there situate) from the Kentucky apportionment of the " capital stock."

A supplemental bill, filed, after hearing and decision, by permission of the court but apparently disregarded, is not to be taken as confessed by the defendant for want of answer when no rule to answer was made upon him and his failure to do so is not explained by the record; nor, in the silence of the record, is error to be imputed to the trial court for not paying heed to material allegations thus presented.

A party attacking a tax assessment is not to be held in default for omission to introduce evidence on matters which were not deemed material by the taxing authority or in the litigation until found so by the judge in his decision.

It being shown that the valuation made by a taxing board was the

Page 244 U. S. 525

result of following a method substantially erroneous because not in accordance with the governing statute, it is error for the court to presume that a like valuation would have been reached by following the correct method.

30 F. 191 reversed in part and affirmed in part.

The case is stated in the opinion.

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