Western Union Telegraph Co. v. Tax Commission of Ohio

HOUGH, District Judge.

The complainants are New York corporations, and the bills allege diversity of citizenship and unconstitutional action and threatened action on the part of the tax commission of Ohio, contra to the guaranties contained in the Fourteenth Amendment to the Constitution of the United States, and the uniformity clause of the state Constitution (article 12, § 2).

The cases have been submitted to this court, constituted under the provisions of section 266 of the Judicial Code (Comp. St. § 1243), upon the bills, the answers of the tax commission of Ohio, and the proof, and upon the application of the complainants for the issuance of preliminary injunctions to supersede temporary restraining orders heretofore granted, and the application of the defendant tax commission, raised both by motion and answer, to dismiss the bills.

The specific injunctive relief sought, is to enjoin and prevent the tax commission from certifying the values of complainant’s property in Ohio, found by it upon hearing and rehearing to be subject to taxation, and of *357definite and specific values, to the auditors of the various counties in the state, in proportion to the amount of the properties in such counties.

The complainants attack the amount of valuation only, raising no question that the property so valued and subsequently to be assessed does not have its situs for taxation in Ohio and is not liable to taxation here. This attack upon the valuation is presented in a twofold aspect: (1) That such property has been overvalued; and (2) that other property throughout the entire state is systematically valued at less than its true value in money, and that the valuation of complainant’s property is therefore discriminatory and results in imposing an unequal and illegal burden of taxation upon complainants, in violation of the federal and state Constitutions. No tax has yet been assessed and none could be assessed until the valuation is apportioned and certified to the county auditors; and manifestly no tender has been made of taxes admittedly to become due.

In the year 19.10 and the years following, the Legislature of Ohio made some radical changes in the taxing machinery of the state and in the taxing personnel thereof. Under the executive branch of the state government, it created the Ohio tax commission, and clothed it with plenary powers, as appears by sections 1465 — 1 to 1465 — 36, inclusive, of the General Code of Ohio. In section 1465 — 33 it is provided that “all powers, duties and privileges imposed and conferred upon any state board, * * * or any power or duty theretofore conferred upon any state or county officer or board, which power and duty by such act was conferred upon such commission, is hereby imposed and conferred upon the commission created by such act. • *

The taxation machinery proper is dealt with in sections 5320 to 5773, .inclusive, of the General Code. And in section 5579 it is provided that, “in addition to all other powers and duties vested in or imposed upon it by law, the tax commission of Ohio shall direct and supervise the assessment for taxation of all real and personal property in the state. County auditors shall, under the direction and supervision of the tax commission of Ohio, be the chief * * * assessing officers of their respective counties, and, * * * shall list and value real and personal property for taxation, within *• * * their respective counties, except as may be otherwise provided by law. There shall * * * be in each county, a board to hear complaints and revise assessments of real and personal property for taxation, which shall be known as the county board of revision.”

And in section 5610 it is provided that “an appeal from the decision of a county board of revision may be taken to the tax commission of Ohio. * * * ”

The assessment of telegraph and telephone companies’ property for taxation is made the duty of the tax commission itself under/the authority of section 5446, General Code.

Its valuation on finding of liability of property for taxation, whether in ease of an original valuation or other original proceedings of such board, or an appeal from the county board of revision, is final and conclusive for the current year (section 5611 — 1, General Code), unless reversed, vacated, or modified, as provided in the next section. Section 5611 — 2, General Code, confers jurisdiction upon the court of common pleas by petition in error, for the purpose of obtaining a reversal, vacation, or modification of the final determination of the tax commission, and further provides that “no determination of the tax commission as to the value of property for taxation shall be reversed, vacated, or modified unless it is shown by clear and convincing evidence that the value of the property, as determined by the tax commission, is not the true value in money of such property.” !

By section 5613, General Code, all the property in the state comes under the jurisdiction and consideration of the tax commission, to determine whether or not all or any class of that property has been listed at its true value in money, and it may increase or decrease the aggregate value of the real property or of the personal property, or any class of real or personal property, in any county, township, city, village, or taxing district, by such rate of per cent, or by such amount as will place such property on the tax list at its true value in money, to the end that each and every class of real and personal property shall be listed and valued for taxation by a/n equal and uniform rule at its true value in money. \ It is made the duty of the respective county auditors, upon the final certifications by the tax commission to them, to place the values upon the county tax duplicate., Sections 5448 and .5615, General Code. ’ i

It was apparently the intent of the Legislature that no state judicial action be permitted .to interfere with the activities of the tax commission, except as provided in section 5611 — 2, General Code, as it has provided in section 1465 — 31 that “no injunction shall *358issue sustaining or staying any order, determination, or direction of the commission * * * required by law to be taken in pursuance of any such order, determination or direction, but nothing herein shall affect any right or defense in an action to collect any tax or penalty.”

This later legislation repealed in part, at least, section 12075, General Code, which had been upon the statute books for many years, and provided: “Common pleas * * * courts may enjoin the illegal levy or collection of taxes and assessments, and entertain actions to recover them back when collected, without regard to the amount thereof,.but no recovery shall be had unless the action be brought within one year after the taxes or assessments are collected.”

The legislative taxation structure confers upon the tax commission the power and duty to value originally public utilities property; to find the ultimate value of the property of specific individuals who have remonstrated and appealed the question of value to the commission ; and, finally, upon an abstract of the real and personal property transmitted to it by the various county auditors, under section 5G12, to pass upon the various classes of property in the respective taxing districts, and, under section 5614, to increase or decrease any of the classes of real or personal property, to the end, as provided in section 5613, that “each and every class of real and personal property shall be listed and valued for taxation by an equal and uniform rule at its true value in money.” The commission, therefore, is the final arbiter and valuer of all the property in the state, of whatsoever nature, subject as we have seen to the review provided in section 5611 — 2, General Code.

The answers make issue on the questions of overvaluation of complainant’s property and discrimination and in resistance of the application for injunction raise three questions; namely: (1) The jurisdiction of the court as such; (2) that the complainant’s right of action has not reached a justiciable stage; (3) and that an adequate remedy at law exists.

1. The bills allege diversity of citizenship and the requisite jurisdictional amount involved, and, outside the bare statement of jurisdictional amount, the bills on their face show that subject to proof the requisite jurisdictional amounts are involved.

Upon the question of discrimination or systematic discriminatory valuations on the part of the taxing authorities, that action is assailed as contravening the federal Constitution which presents clearly a federal question within the equity jurisdiction of a federal court as such and one which that court may hear and determine. ' Connecting Gas Co. v. Imes (D. C.) 11 F.(2d) 191; Taylor v. L. & N. R. R. Co. (C. C. A. 6) 88 F. 350; Cummings v. National Bank, 101 U. S. 153, 25 L. Ed. 903; Greene v. Louisville & Interurban R. R. Co., 244 U. S. 499, 37 S. Ct. 673, 61 L. Ed. 1280, Ann. Cas. 1917E, 88; L. & N. R. R. Co. v. Greene, 244 U. S. 522, 37 S. Ct. 683, 61 L. Ed. 1291, Ann. Cas. 1917E, 97; Chicago G. W. Ry. v. Kendall, 266 U. S. 94, 45 S. Ct. 55, 69 L. Ed. 183; Risty v. C., R. I. & P. Ry. Co., 270 U. S. 378, 46 S. Ct. 236, 70 L. Ed. 641; Railroad & Warehouse Com. of Minnesota v. Duluth St. Ry. Co., 47 S. Ct. 489, 71 L. Ed. 807 (decided April 11, 1927).

2. Is there a remedy judicial in form, to be entertained by the courts, namely, Has the justiciable stage arrived?

The solution of this question will call for some inquiry relating to the construction and interpretation of section 5611 — 2, General Code. It is conceded that the complainants did not avail themselves of the procedure provided in that section, and we think that, inasmuch as a hearing and a rehearing had taken place in respect to the actual values of complainants’ property, under the clear and unambiguous language used in section 5611 — 2, General Code, it must also be conceded that the tax commission has taken its final action in respect to those values for the current year. That the tax commission is clothed with administrative powers is beyond dispute. The fixing of values for taxation is essentially administrative. But it would also seem that that body is clothed with some powers judicial in nature. The determination by it of whether or not property is subject to taxation comes within the latter class. The author of the opinion in the case of' Stanton v. Tax Commission, 114 Ohio St. 658, 151 N. E. 760, when that court had before it and sustained the constitutionality of section 5611 — 2, General Code, considered the tax commission to be a board having quasi judicial powers, although that court did not have before it nor did it decide that point.

The appeal to the common pleas court under section 5611 — 2, General Code, is a proceeding in error, both under the express language used in the act itself, and by force of the decision of the court of last resort in the state. Floyd v. Light & Heat Co., 111 Ohio St. 57, 144 N. E. 703. The latitude of the appeal seems to include the determination of whether given property is subject to taxation, *359and whether the value finally determined by ' the tax commission is the true value in money. The court is given the power of reversing, vacating, or modifying the findings of the tax commission. The determination of whether or not the property is subject to taxation is a legal question, and the appeal thereof under this section is an appeal to a judicial tribunal. Again, the appeal from the find- ■ ing of the commission upon the value of the property, in so far as it is subject to reversal by the court of common pleas by, proceedings in error, and subject to be taken to the higher courts, and where the common pleas court exercises its jurisdiction by either affirming or reversing and remanding the action of the tax commission, would seem to be a judicial proceeding addressed to a judicial tribunal. The power to modify the finding of the commission as to value given to that court places in the court the right to exercise a judgment which is a substitute with controlling effect to the judgment of the tax commission. This latter aspect of the jurisdiction of the common pleas court appears to be purely administrative. Thus we find in the appeal provided by -section 5611 — 2, General Code, elements of jurisdiction that are clearly judicial, and it cannot be said that the court under the provisions of the statute is clothed only with the exercise of administrative powers. City Railway Co. v. Beard (D. C.) 283 F. 313. Moreover, no language in the act providing for review can be construed to include the question of systematic discrimination and ununiformity and inequality of tax valuation. We are therefore constrained, in view of the language of the statute limiting the courts to a determination of the true value in money of the property, to hold that the review provided for is not purely administrative, but has uneraseable judicial elements, or at least to say, which is sufficient for the purposes of this ease, that, whatever be the character of the review, the state courts have no power under the statute to determine whether an assessment is discriminatory, and, being so limited in their powers, the action of the commission in fixing the value at the true value in money of the property, is, in so far as unlawful discrimination is concerned, the final administrative act. '

In the Beard Case referred to, it was held by Judge Sater, that the common pleas court was a judicial tribunal, acting judicially and not administratively, and that, when the commission had finally acted on the valuation, the justiciable stage was reached. Ohio Fuel Supply Co. v. Paxton (D. C.) 1 F.(2d) 662, later considered by the Court of Appeals, Sixth Circuit, 11 F.(2d) 740, seems to recognize the correctness of this ruling. In the Bacon Case, 232 U. S. 134, 34 S. Ct 283, 58 L. Ed. 538, the statute gave to the party- aggrieved, by the order of the Public Service Commission, the right to take the ease to the Supreme Court by appeal, and that court was given the same powers therein that it had over other appeals, by which it might reverse or affirm the judgment, orders, or decrees of the board, or remand to the board upon mandates, in accordance with the law or equity of the case, and the board in that event was required to enter a judgment or decree in accordance with such mandate, and Mr. Justice Holmes writing for the court said that it was apparent that the statutes of the state did not attempt to confer “legislative powers upon the court”; that they only provided an alternative and more expeditious way of doing what might be done by a bill in equity; and that, when the Public Service Commission had acted, the justiciable stage had been reached and the party aggrieved was free to assert his right in a federal court of equity. The court differentiated that ease from Prentis v. Atlantic Coast Line Co., 211 U. S. 210, 29 S. Ct. 67, 53 L. Ed. 150, where, under the Constitution of the state of Virginia, the courts were clothed with administrative powers, and in which it was held that, before bringing its bill in equity, the. complainant should have exhausted the administrative procedure and' “made certain that the officers of the state would not undertake to enforce an unconstitutional rule.” The difference between the Prentis Case and other cases involving the same principle, such as Singer Sewing Machine Co. v. Benedict, 229 U. S. 481, 33 S. Ct. 942, 57 L. Ed. 1288, Keokuk & Hamilton Bridge Co. v. Salm et al., 258 U. S. 122, 42 S. Ct. 207, 66 L. Ed. 496, and First National Bank of Greeley v. Board of Com’rs of Weld County, Colo., 264 U. S. 450, 44 S. Ct. 385, 68 L. Ed. 784, and the case at bar, is clear, because there is no power in the courts to relieve complainants, if their claims be true, of an unconstitutional discrimination.

In Ohio Valley Water Co. v. Ben Avon Borough, 253 U. S. 287, 40 S. Ct. 527, 64 L. Ed. 908, the Supreme Court of Pennsylvania had interpreted the statutes of the state as withholding from the courts the power to determine questions of confiscation, according to their own judgment, when the action of the Public Service Commission came to be considered on appeal in connection with the fixing of rates; and hence it was held that the duties of the courts upon appeals were judicial in character and not legislative, and that, aft*360er the Public Service Commission had finally acted, the right of appeal to the federal courts upon established judicial grounds was available-to the party who was aggrieved.

In Chicago, B. & Q. R. Co. v. Osborne, 265 U. S. 14, 44 S. Ct. 431, 68 L. Ed. 878, suit was brought to restrain the collection of taxes upon the ground that there had been a systematic undervaluation of the property, re-" suiting in an unjust discrimination against complainant. Its property was assessed by the board of equalization and assessment, which equalized the assessments of other properties. The state statute provided for a writ of error to the Supreme Court to review the action of the board on a record prepared by it. The Supreme Court said, “A remedy in the state courts only has been held not to be enough”; and, furthermore, that-the most that the state court could do, would be to set aside an excessive valuation, and remand the matter to the same board to try again, “which is hardly satisfactory, if the board is seeking to evade the law”; and it was held that the justiciable stage had been reached.

Is it necessary, for the complainants to defer action to enjoin until after certification and the entry of the tax charges on the duplicates of the respective counties, and then to avail themselves of the right of action'under section 12075, General Code? We believe this not to be necessary. The final determination of the value of their property for taxation fixes the status of their property in its relationship to the value of all other property upon the question of uniformity of value, and, so far as the question of discrimination is concerned, is the crux of the matter. The act of- certification by the commission, the act of placing valuations upon the various tax' duplicates by the county auditors, the subjecting of the amounts of valuation to the appropriate rates, and the making of the clerical extensions in laying the tax charge, are all duties imposed by law, ministerial, clerical, and mandatory, on the part of the appropriate officers. Western Union Telegraph Co. v. Poe (C. C.) 61 F. 449; Sanford v. Poe (C. C. A.) 69 F. 546, 60 L. R. A. 641. See, also, Hammond v. Winder, 100 Ohio St. 433, 126 N. E. 409, 24 A. L. R. 318. In Telegraph Co. v. Poe, supra, Circuit Judge Taft had this to say: “It is first said that the injunction sought is premature, because against the valuers, and not against the collecting officers. * * * What is here sought to be enjoined is the certificate by the board of appraisers to the county auditors of the amounts to be assessed against plaintiff. The auditors are then,, by law, required to place the same upon the tax duplicate, and deliver the duplicates to the county treasurers as warrants for the collection of the taxes. The duties of the county auditors and treasurers in this matter are wholly ministerial. The law reposes in them, no discretion whatever, to reduce or modify the assessment. * * * ” .

3. Whether there is equity jurisdiction to grant the relief sought depends initially upon the adequacy of the remedies at law open to the complainants. This we have touched upop in the discussion of the question just disposed of; but we have thus far failed 'to note that, if the property of the taxpayer is situated in several counties of the state, the statute gives him the right to appeal to the common pleas court in the county wherein the largest part of his property is situated and have determined in that court whether the assessment made by the commission is on the basis of the true value in money of the property. An alternative, we assume, is to pay the taxes and sue the collecting officers to recover back what they unlawfully exacted. Are these remedies adequate, leaving out of consideration the test of equity jurisdiction as stated in Risty v. Chicago, etc., Co., 270 U. S. 378, 46 S. Ct. 236, 70 L. Ed. 641, namely: “The inadequacy of the remedy on the law side of that [federal] court and not the inadequacy of the remedies afforded by the state courts.”

Under the first, as we have seen, complainants cannot raise the constitutional question of a discriminatory assessment, but may only complain of an assessment in excess of the actual value of the property in money. Thus the very ground on which complainants are attacking the action of the commission is by the statute foreclosed to them in the remedy which has been provided through the instrument of the common pleas and other courts. The other remedy of paying the excess tax and suing to recover it back, does not, we think, afford that adequacy of remedy that will justify a court of equity in declining to interfere with an unlawful act. In that case it is Pot clear that there would not be a multiplicity of suits; and, even if it were permissible and practicable to bring a single suit against all the tax collectors, there would certainly be difficulties in fixing values and apportionments among the taxing units, and, as pointed out in Wilson v. Ry. Co., 263 U. S. 574, 44 S. Ct. 203, 68 L. Ed. 456, Atlantic. Coast Line R. Co. v. Daughton, 262 U. S. 413, 43 S. Ct. 620, 67 L. Ed. 1051, and many other cases, the adequacy of the remedy must be clear.

In Dawson v. Kentucky Distilleries & *361Warehouse Co., 255 U. S. 288, 41 S. Ct. 272, 65 L. Ed. 638, it was contended thát, inasmuch as the complainant could pay the tax and recover it hack in an action at law, there was an adequate remedy, but, in discussing the question, the court again pointed out that, if the remedy at law be' doubtful, a court of equity would take cognizance of the case; and further that, “if the equitable remedy was available in the state courts, it was not lost by suing in the federal courts,” jurisdiction in the latter courts existing. See, also, Union Pacific R. R. Co. v. Weld County, 247 U. S. 282, 38 S. Ct. 510, 62 L. Ed. 1110, Sioux City Bridge Co. v. Dakota County, 260 U. S. 441, 43 S. Ct. 190, 67 L. Ed. 340, 28 A. L. R. 979, and Chicago, B. & Q. R. Co. v. Osborne, 265 U. S. 14, 44 S. Ct. 431, 68 L. Ed. 878. It is of course immaterial here whether there is or is not available to complainants the right of an equitable action in the .state courts to enjoin certification of the assessment, since there is jurisdiction in this court because of diversity of eitizenship with the requisite amount involved, and also because of the constitutional grounds alleged; and clearly the party who is aggrieved has the right to choose the forum in which he will assert his claim.

In Greene v. Louisville & Interurban Ry. Co., 244 U. S. 499, 37 S. Ct. 673, 61 L. Ed. 1280, Ann. Cas. 1917E, 88, there was an assessment by the board of valuation and assessment, and the railroad company brought suit to restrain the certification of the assessment to the various taxing units of the state upon the ground that it was discriminatory. After holding that there was equity jurisdiction, not only to restrain the enforcement of an unconstitutional statute, but also unconstitutional acts done under a constitutional statute, the eourt pointed out that} although the state Constitution required that property be assessed at its full value, the duties of the assessing board under this provision of the Constitution must be considered in connection with other provisions of the Constitution of the state, one of which was to assess the property uniformly, and held that the failure to do the latter was a denial of the equal protection of the laws, and that the provision requiring assessment at full value must yield to the more compelling requirement of uniformity of taxation. Upon the showing made, the eourt enjoined the certification.

The very provision of the Constitution of the state of Ohio that requires the assessment of property at 100 per cent, of its value also requires uniformity of assessment, presenting a situation like that in the Greene Case, which, with Taylor v. L. & N. R. R. Co., 88 F. (6 C. C. A.) 350, was referred to in the Sioui City Bridge Company Case, 260 U. S. 441, 43 S. Ct. 190, 67 L. Ed. 340, 28 A. L. R. 979, where, in discussing the enforcement of uniformity clauses of state statutes and Constitutions and the eqqal protection clause of the Fourteenth Amendment, it was said: “Where it is impossible to secure both the standard of the true value, and the uniformity and equality required by law, the latter requirement is to be preferred as the just and ultimate purpose of the law.”

Nor is there in our opinion any question here of judicial interference by injunction or otherwise with the discretion of executive officers of the government. Such cases as Gaines V. Thompson, 7 Wall. 347, 19 L. Ed. 62, and Riverside Oil Co. v. Hitchcock, 190 U. S. 316, 23 S. Ct. 698, 47 L. Ed. 1074, involve the discretion and judgment of executive officers of the Land Office, upon whom quasi judicial functions had been conferred. It is true, as stated in U. S. v. Fisher, 223 U. S. 683, 32 S. Ct. 356, 56 L. Ed. 610, State of Louisiana v. McAdoo, 234 U. S. 627, 34 S. Ct. 938, 58 L. Ed. 1506, and many other eases that might be cited, that neither injunction nor mandamus will lie against an executive officer to control him in discharging an official duty which requires the exercise of judgment and discretion. All of those cases have clearly recognized the distinction between acts involving discretion and judgment and those of a purely ministerial character. The latter, in so far as they affect the rights of citizens, are undoubtedly subject to the control of the courts. The tax commission of Ohio, upon hearing and rehearing, has finally assessed complainant’s properties at their full value; it has no further discretion. Certification is purely a ministerial act. It is that act which complainants seek to enjoin, and we have no doubt that it is within the power of the court to enjoin it if its commission will result in irreparable injury.

It is admitted by defendants that complainants’ properties have been assessed at full value. A preliminary showing has been made that other property in the state has been assessed at not exceeding 75 per cent, of its value. Upon this showing the commission has acted arbitrarily and with systematic discrimination in assessing complainants’ property as compared with the valuation of other property in the state, in imposing an unequal burden of taxation upon complainants. Both bills aver willingness to pay taxes assessed on a valuation uniform with the assessed value of other, property. In the nature of the case such taxes cannot be paid until there *362have been certifications of the valuations. Payment of them, therefore, should not be made a condition of a preliminary injunction. Such an injunction may be issued in each case enjoining the tax commission from certifying more than 75 per cent, of the amount finally found by it to be the value of the complainants’ property, upon each of the complainants giving bond, conditioned according to law, in the sum of $10,000.

MOORMAN, Circuit Judge, concurs in' the result.