UNITED STATES SUPREME COURT DECISIONS ON-LINE

The provisions of the Fourteenth Amendment are not confined to the action of the state through its legislative, executive, or judicial authority, but relate to all instrumentalities through which the state acts, and so held that the action of a state board of equalization, the decisions whereof are conclusive except as proceedings for relief may be taken in the courts, is reviewable in the federal courts at the instance of one claiming to be thereby deprived of his property without due process of law and denied the equal protection of the law.

Action of a board of equalization resulting in illegal discrimination held in this case not to be action forbidden by the state legislature, and therefore beyond review by the federal courts under the Fourteenth Amendment. Barney v. City of New York, 193 N.Y. 430, distinguished.

Where a corporation has paid the full amount of its tax as based upon the same rate as that levied upon other property of the same class, equity will restrain the collection of the excess illegally assessed, there being no adequate remedy at law, when it appears that it would require a multiplicity of suits against the various taxing authorities to recover the tax, and that a portion of it would go to the state, against which no action would lie, and where the amount is so great that its payment would cause insolvency, and a levy upon the property -- in this case, a street car system -- would embarrass and injure the public.

114 F.5d 7 affirmed.

The appellants, who were defendants below, have appealed from the judgment of the Circuit Court of the United States for the Northern District of Illinois. The case is one of several argued together, the facts in regard to which are substantially the same. It was brought to enjoin the appellants from taking any further proceedings towards the collection of certain taxes assessed against the appellee upon an assessment alleged to be in violation of the Fourteenth Amendment to the Constitution of the United States, and which, if enforced, would result in the taking of appellee's property without due process of law, and in denying to it the equal protection of the laws. clubjuris

Page 207 U. S. 21

The case was brought in the Circuit Court of the United States at Chicago, and an opinion was delivered by that court at the time of the judgment for appellee. 114 F.5d 7. An earlier opinion upon a previous motion in certain traction company cases, relating to one phase of the matter in controversy, which was pending at the time in the Southern District of Illinois, is to be found in 112 F.6d 7. The questions arise by reason of the provisions of the Constitution of the State of Illinois and certain sections of its tax statutes or revenue laws. The material part of article 9, section 1, of the Constitution of Illinois, 1870, is as follows:

"The general assembly shall provide such revenue as may be needful by levying a tax by valuation so that every person and corporation shall pay a tax in proportion to the value of his, her, or its property, such value to be ascertained by some person or persons to be elected or appointed in such manner as the general assembly shall direct, and not otherwise; but the general assembly shall have power to tax . . . insurance, telegraph, and express interests or business, vendors of patents and persons or corporations owning or using franchises and privileges in such manner as it shall from time to time direct by general law, uniform as to the class upon which it operates."

The following are the statutes in question:

"Real property shall be valued as follows: first, each tract or lot of real property shall be valued at its fair cash value, estimated at the price it would bring at a fair voluntary sale."

Hurd's Rev.Stat. 1899, c. 120, par. 4.

"Personal property shall be valued as follows: first, all personal property, except as herein otherwise directed, shall be valued at its fair cash value. . . . fourth, the capital stock of all companies or associations now or hereafter created under the laws of this state, except those required to be assessed by the local assessors and hereinafter provided, shall be so valued by the State Board of Equalization as to ascertain and determine respectively the fair cash value of such capital stock, including the franchise, over and above the assessed value of

Page 207 U. S. 22

the tangible property of such company or association,"

"arriving at such valuation from the best information obtainable, taking into consideration, among other things, the market value of their shares of stock, and the total amount of their indebtedness."

Hurd's Rev.Stat. 1899, c. 120, § 3.

The State Board of Equalization is the body that makes the original assessments upon the capital stock, etc., of corporations like the ones in question here, and there is no appeal from its valuation or decision.

The following are some of the averments of the bill of complaint filed by the appellee in this suit: the defendants were, respectively, the Town Collector of the Town of North Chicago and the County Treasurer of Cook County, the City of Chicago being within in the limits of that county. In November or December of the year 1900, a valid assessment was made by the State Board of Equalization, assessing the full value of the capital stock of the appellee, including franchises at the sum of three millions of dollars over and above the value of the tangible property of the appellee, and, in accordance with the provisions of the revenue law then in force, it decided, ascertained, and set down the sum of $600,000, one fifth of the above-mentioned $3,000,000, as the assessed value of the appellee's property, designated as "capital stock, including the franchise," for all purposes of taxation. This assessment was never vacated, annulled, or set aside, but was duly certified to the proper officer, and the state, county, city, and all other kinds of taxes levied for the year 1900, for and against property situated in the said Town of North Chicago, were duly extended against such assessed value of $600,000, and the taxes were also extended against said assessment made upon the tangible property of the appellee for the year 1900, and a warrant was duly issued to the Town Collector clubjuris

Page 207 U. S. 23

of the Town of North Chicago, directing him to collect the taxes so extended. On or about the twenty-eighth day of January, 1901, appellee paid to the Collector of the Town of North Chicago the sum of $52,902 in full satisfaction of all the taxes assessed against the appellee, and no part of the money so paid by appellee in satisfaction of the taxes has ever been returned or tendered back to the company, but, on the contrary, the money has been paid over by the collector, less his commission, either directly or through the county treasurer of the county, to the various taxing and public bodies entitled to receive the same, and has been used or is still retained by said bodies, respectively.

On the tenth day of November, 1900, proceedings by taxpayers were instituted against the State Board of Equalization to compel that board to make an assessment for that same year against the appellee upon its capital stock and franchises. This application was made while the State Board of Equalization was in session, but before any final action had been taken by the board to determine and fix the proper assessment to be made on the capital stock of the appellee. It was alleged in the petition that the State Board of Equalization intended to adjourn its session without making any assessment upon the capital stock, including the franchises, of the appellee and on twenty-two other corporations doing business in the City of Chicago, and that it intended illegally to neglect and refuse to discharge the statutory duty obligatory upon it in that regard. Neither the appellee nor the other corporations mentioned in the petition were made parties to the proceedings, nor did they ever become parties thereto. The defendants therein, members of the State Board of Equalization, denied that they had refused or intended to refuse to discharge their duties as members of the board. Thereafter, the board assessed the capital stock of the respondent, including the franchise, as already stated, and on the third of December, 1900, adjourned sine die.

Before this adjournment, and on the sixteenth of November, 1900, the mandamus proceedings had been continued, and no clubjuris

Page 207 U. S. 24

action was thereafter taken therein until about the twelfth day of March, 1901. About the first of May, 1901, the proceedings came on for trial and terminated in a judgment directing that a writ should issue against the members of the State Board of Equalization requiring the board to convene and forthwith value and assess the capital stock of the appellee

"so as to ascertain and determine respectively, as to each of said corporations, the fair cash value of its capital stock, including its franchises, over and above the assessed value of the tangible property of such company for the year 1900."

An appeal was taken to the supreme court from that judgment, but no evidence was introduced on the trial of the case in support of the merits of the assessment theretofore made upon the capital stock, including franchises, of the appellee, and no argument was made either in the trial court or in the supreme court, upon appeal, in support of the merits of the assessment, the defense being rested almost wholly on objections to jurisdiction, and other legal grounds, touching the power of the court to grant the relief prayed for. (A method of assessing the capital stock had been adopted by the board, which omitted the indebtedness of the corporations as a factor in the valuation of such stock, and it was this error which led to the original assessments upon those corporations, and that caused the mandamus proceedings.)

The amount of the assessment against the appellee for the year 1900 appeared upon the trial of the mandamus proceedings, and it was found by the trial court that the assessment was so low as to show that it was in fact a fraudulent assessment, and therefore in law no assessment at all, and upon appeal the supreme court held that the finding of the court below was justified, and that, under such circumstances, where there was in law no assessment, the court might compel the board to fulfill its duty by assessing the property of the taxpayer thus fraudulently undervalued. See state Board v. People, 191 Ill. 528. The state court held that, under the provisions of the statute of Illinois, the State Board of clubjuris

Page 207 U. S. 25

Equalization, acting as the original assessor of the capital stock and franchises of corporations, might make an assessment of omitted capital stock and franchises of corporations under the section of the statute referred to. See §§ 276, 277 of the revenue act, Hurd's Stat. 1899, page 441.

The judgment of the circuit court granting the writ of mandamus was thereupon affirmed by the supreme court, and the writ was issued on the twenty-second of November, 1901, against the board. The writ, as issued under the direction of the supreme court, after reciting that the previous assessment was in fact no assessment in law, and was unreasonable, arbitrary, and fraudulent, and was not the expression or the result of the honest judgment and discretion of the State Board of Equalization and the members thereof, and amounted to a wrongful, willful, and arbitrary failure, omission, and refusal to assess the capital stock of the appellee at its fair cash value over and above tangible property of the appellee, and was a fraud in law and upon the relators and the people, directed the members of the board to assemble and to forthwith proceed to value and assess the capital stock, including the franchises of the appellee as of the first day of April, 1900, in the manner provided by law,

"and that you, the said State Board of Equalization and the members thereof, do value the capital stock of said corporations and each of them so as to ascertain and determine, respectively, as to each of them, the fair cash value of its capital stock, including the franchise, over and above the equalized assessed value of the tangible property of such corporation on the first day of April A.D. 1900, and that, in arriving at said valuations and assessments of capital stock, including the franchises of the corporations herein named, the said state board and the members thereof, from the best information obtainable by it and them, shall ascertain and take into consideration, among other things, as to each said corporation, as the same was on April 1, 1900, the market value, or, if no market value, then the fair cash value, of its shares of stock and the total amount of all indebtedness, except the indebtedness

Page 207 U. S. 26

for current expenses, excluding from such expenses the amount for purchase or improvement of property and the assessed or equalized value of tangible property owned by said corporations, respectively, on April 1, 1900."

Pursuant to what the defendants believed to be the command of the writ, and without any independent judgment of their own, the members of the board proceeded to make an assessment upon the aggregate of the value of the capital stock, including franchises, of the appellee, and including its indebtedness, deducting therefrom the assessed equalized valuation of the real estate and tangible personal property belonging to the appellee, and then assessing for taxation one fifth thereof. At this time and for years previous thereto, all property, real and personal, corporate or individual, throughout the state, as well as in Cook County, had been assessed as not to exceed 65 or 70 percent of its fair cash value, and one fifth of that percent was the amount upon which the tax was laid. This assessment, however, was not so made, but one fifth of the full value was assessed, and the roll thus made up was delivered to the proper officer, and an extension of the taxes made, and a warrant delivered to the town collector for collection. The total tax of the appellee on the second assessment amounted to about the sum of $1,000,000 more than the tax paid under the first assessment. It is the duty of the collector and the county treasurer to enforce the collection of these taxes, together with a penalty by reason of the delay in payment, and to that end, levy the amount by distress and sale of the goods and chattels of the appellee, and which cannot be prevented or defended by the appellee otherwise than by payment or by a bill in chancery. The appellee's personal property consists chiefly of its cars and other personal property actually used in its business of transporting passengers, and levy of said tax will greatly embarrass it in its business and also injure the public using its cars. After collecting the taxes it is the duty of the collector, and he is required by law, to pay over and distribute them in the proportions designated in the clubjuris

Page 207 U. S. 27

tax book to the City Treasurer of the City of Chicago, the County Treasurer of Cook County, the treasurer of the sanitary district, and the other officers and authorities entitled to receive the same. In order to recover back the amount thus paid to the collector, appellee will be obliged to bring separate suits against each one of the bodies receiving its proportionate share of said tax, necessitating a multiplicity of suits. Repayment of the amount which should be paid for the uses and purposes of the State of Illinois could not be enforced by and legal proceeding whatever, nor could repayment be obtained from anyone which would cover the costs, including the commissions deducted for the recovery of the taxes, and if proceedings to collect the taxes were not enjoined great and irreparable injury would result to the appellee, for which there was no complete or adequate remedy at law. It was then alleged that to pay the enormous sum of over a million of dollars, claimed as the tax for 1900, would render it impossible for the company to pay its rentals or preserve its leasehold interests, and would necessarily result in its insolvency. It was also averred that there were hundreds of corporations subject to be assessed by such board in the same manner that the appellee was assessed under the writ of mandamus issued in respect to the taxes assessed against it, and that not one of such corporations was, as a matter or fact, so assessed, but a discriminating, crushing tax burden was placed upon appellee and the other corporations mentioned in the writ, contrary to the provisions of the Constitution of the United States, and in violation of the Constitution of the State of Illinois.

Within a month of the time when the assessment of 1900 was made under the command of the writ the same board of equalization made an assessment upon the property of the appellee for the year 1901, using the best judgment of its members, and at that time it equalized the assessment with other property assessed throughout the state, and the difference between the two assessments is most material. The facts are stated in the opinion or the circuit judge, as follows: clubjuris

Page 207 U. S. 28

"A comparison between these records of the the state board is significant. In the case of the Chicago Union Traction Company, the assessment for the year 1901 -- capital stock and tangible property aggregated -- falls from a little over fourteen millions of dollars (the reassessment for 1900) to about eight millions, two hundred and fifty thousand dollars -- a loss of about forty percent"

"In the case of the Chicago Consolidated Traction Company, the depreciation is from a little over three millions, seven hundred and fifty thousand dollars to about two millions of dollars, or about forty-seven percent"

"In the case of the People's Gas Company, the depreciation is from over twelve millions and a half to about eight millions and a half, or about thirty-two percent"

"In the case of the Chicago City Railway, the depreciation is from a little over six millions to a little over four millions and a quarter, or about thirty percent"

"In the case of the Chicago Telephone Company, the depreciation is from a little less than two millions, six hundred thousand dollars to a little over one million, seven hundred thousand dollars, or about thirty-four and one half percent"

"In the case of the Chicago Edison Company, the depreciation is from a little over two millions, four hundred thousand dollars, to a little over one million, three hundred thousand dollars, or about forty-six percent"

"In the case of the South Chicago City Railway, the depreciation is from nearly five hundred seventy thousand dollars to a little less than three hundred thousand dollars, or about forty-seven percent"

"These assessments, so widely divergent, were upon the same properties, by the same board, entered almost on the same day. The dates of which they spoke of were, it is true, a year apart; the one being of the first of April, 1900, the other of the first of April, 1901. But the tide of stock quotations, and the tide of current values, were higher on the latter day than the former. If between these two assessments a considerable disparity

Page 207 U. S. 29

should exist, the increase ought to be found in the assessment for 1901, and not in that for 1900."

Other averments were made in the bill, designed to raise other questions than the ones discussed in the following opinion, and for that reason are not set forth.

The defendants put in their answer and joined issue in regard to many of the material averments contained in the bill. The case was referred to a matter and testimony was taken and a report made by the master to the court, in which he found all the material averments of the bill had been proved. The court approved the findings of the master, but before granting the injunction, it ordered that the appellee should pay to the city an amount which the court found was fairly and equitably due from the appellee as its proportion of the taxes for 1900. The sum was arrived at by the court by a computation which, in its judgment, produced a fair and proper result. The amount directed to be paid by the court before the injunction should issue was the sum of $134,350.03, which sum the appellee paid, and the injunction issued as directed. The appellants duly excepted to the findings of the master that the amount of taxes equitably due from the appellee was as just stated, and the appellants insisted that the finding of the master of the amount of tax to be paid should have been the sum of $961,154.15 for general taxes, and $58,057.63 for interest thereon, making a total of $1,019,211,78 as due from the appellee for the taxes of 1900, as evidenced by the collector's warrant in the hands of the defendants in this suit.

It was also averred that the assessment was grossly excessive and the property greatly overvalued. clubjuris

Page 207 U. S. 35