Petition for a Writ of Certiorari — Lehigh Valley RR Co. v. Martin, State Tax Comr. of New Jersey, et al.

Court, Us

THE MAR 26 194]

Supreme Court ea tt Y States: 0900

No. 63 = fap 1940.

LenicH VauiEy Ramroap Company,

(Plaintiff-Appellee in the Court Below),

Petitioner,

v.

J. H. THAYER MARTIN, State Tax Commissioner of the

State of New Jersey, e¢ al.,

(Defendants-Appellants in the Court Below),

Respondents.

(And 17 Other Cases as Listed on Inside Cover.)

PETITION AND BRIEF IN SUPPORT OF PETITION

FOR WRITS OF CERTIORARI.

Maximmian M. Stauiman,

Counsel for Petitioners,

810 Broad Street,

Newark, N. J.

Maurice Bower Savt,

RicHarp W. Barrett,

JacoB ARONSON,

Herpert A. TayY.Lor,

Doveias Swirt,

Of Counsel.

Arthur W. Cross, Inc., Law Printers, 71-73 Clinton St., Newark, N. J., U. S. A.

POLIS OPS FPS I TTS SFE EPR AIT

(Cases continued from Front Cover)

Years

(1934) (1935) (1936)

C. C. A. numbers

D. L. d W. R. R. Co. vs. Martin, et als. 7349 7357 7365

Erie R. R. Co. vs. Martin, et als............. 7350 7358 7366

Lehigh Valley R. R. Co. vs. Martin, et

als, 7351 7359 7367

N.J.@N.Y.R.R. Co. vs. Martin, et als. 7352 7360 7368

New York Central R. R. Co. vs. Martin,

et als. 7353 7361 7369

N. Y. & Long Branch R. R. Co. vs. Mar-

tin, et als 7354 7362 7370

INDEX.

Peririon ror Writ or CERTIORARI

Summary Statement or Marrer INVOLvEb..................

THe Questions PresENTED

Reasons RELIED ON FOR THE ALLOWANCE OF THE Waits

PRAYER

CERTIFICATION

Brier 1n Support or Peririon ror Waits or Czrtt-

ORARI

Opinions of the Courts Below

Jurisdiction

Statement of the Case

Specification of Errors to be Urged

Summary of Argument

ARGUMENT:

I. A tax valuation of railroad property made with

entire disregard of the earnings of the prop-

erty and resulting in grossly excessive

values violates the due process clause of the

14th Amendment to the Constitution of the

United States .

II. The Judgment of the Court of Appeals is in

conflict with applicable Decisions of this

Court and of another Circuit Court of

Appeals

PAGE

nonnowk f, we eH

o Oo 6 6& ©

10

10

21

ii

III. The instant cases are sharply distinguishable

from the case of Nashville, etc. R. Co. v.

Browning, 302 U.S. 362

IV. Section 265 of the Judicial Code (USCA 379)

does not apply to these cases

V. The suits are not against the State of New

Jersey within the purview of the Eleventh

Amendment

VI. The ir es are not res judicata

Conclusion

PAGE

31

—

iii

TABLE oF Caszs.

PAGE

Bailey v. Megan, 102 Fed. 2nd, 651 6, 21, 22

Central Railroad Company, etc. v. Martin, 114 N. J.

L. 69 .... 4, 9, 10, 31

Central R. R. v. State Board of Assessors, 49 N. J.

is Bccasiines 28

Cleveland, C. C. & St. L. Ry. Co. v. Backus, 154 U. 8.

439 13, 15

Continental Iil. Nat. Bank, etc. v. Chicago, I. R. & P.

Ry. Co., 294 U. S. 648, 671 12, 23

Cromwell v. County of Sac, 94 U.S. 351, 352................ 33

Ex parte Young, 209 U. S. 123, 130 29

Franklin County v. Nashville, etc., Ry. Co., 12 Lea

(Tenn.) 521 14

Great Northern Ry. Co. v. Weeks, 297 U. 8. 135,

4, 6, 13, 16, 18, 19, 20, 21, 22, 31

In re Walker Grain Co., 294 Fed. 951 25

Iowa-Des Mowmes Bank v. Bennett, 284 U. 8. 239,

245-47 29

Looney v. Crane, 245 U. 8. 178 29

Mississippi, etc. Com. v. Ill. Cent. Ry. Co., 203 U. 8.

335 27

Nashville, etc, Ry. Co. v. Browning, 319 U. 8. 362,

4,5, 11, 18, 19, 20, 21, 23, 24, 25

Pacific T. d T. Co., 2 Fed. (2nd) 151 26

Pittsburgh, etc. Ry. Co. v. Backus, 154 U. S. 421,430 14

Prentis v. Atlantic Coast Line, 211 U.S. 210................ 27

Rawley v. Chicago, etc. R. Co., 293 U. 8. 102.............. 5 31

Reagan v. Farmers Loan & T. Co., 154 U. S. 362, 399..

28, 29, 30

Smyth v. Ames, 169 U. S. 566, 547 15

Southern Ry. Co. v. Kentucky, 274 U.S. 76, 81............ 15

iv

PAGE

Southern Ry Co. v. Greensboro, etc. Co.,202U.8.543 27

State Board, etc. v. Central R. Co., etc., 48 N. J. L.

146, 376 5 : 11,13

State of Illimois v. Illinois Central Railroad, 27 Til.

64, 68 13

United N. J. R. R. Co. v. State Board, 101 N. J. L. 30 33

Wells Fargo & Co. v. Taylor, 254 U. S. 175, 182.......... 25

West v. Chesapeake & P. Tel. Co., 295 U. S. 662, 672 12

Western Union T. Co. v. Myatt, 98 Fed. 335................ 27

Worcester Trust Co. v. Riley, 302 U. S. 292................ 29, 30

SraturEs.

Judicial Code, Section 240, as last amended by Act

of June 7, 1934, 48 Stat. at L. 926, 28 U. S. C. See.

347 9

Section 265 (USCA See. 379)....... 10, 25

Constitution of New Jersey, Article IV, Sec. VI,

Par. 12 (1 N. J. Comp. Stat. LXXXYVI).....000..... 10

General Tax Act, P. L. 1919, pp. 847, 859 (N. J. Rev.

St. 1937, Sec. 54:4-1) 11

Railroad Tax Act, P. L. 1884, p. 142, 1888, p. 269

(N. J. Rev. St. 1937, Sec. 54:22-1) 11

N. J. Rev. St. 1937, Sec. 54:28... 26

IN THE

Supreme Court of the Gnited States

No. ...., Octoper Term, 1940.

Lexie Vauuey Rarroap Company,

(Plaintiff-Appellee in the Court Below),

Petitioner,

Vv.

J. H. Tsayer Martin, State Tax Commissioner of

the State of New Jersey, et al.,

(Defendants-Appellants in the Court Below),

| Respondents.

(And 17 Other Cases as Listed on Inside Cover.)

PETITION FOR WRITS OF CERTIORARI.

To the Honorable, the Chief Justice and Associate Justices

of the Supreme Court of the United States:

Your petitioners respectfully pray that writs of certi- iii

orari may issue to review decrees of the United States Cir- rf

cuit Court of Appeals for the Third Circuit in the cases

listed on the cover. The decrees were filed November 27,

1940 (rehearing deuied January 24, 1941), and reversed ai

judgments of the United States District Court for the Dis-

trict of New Jersey which had held certain tax assessments

for the years 1934, 1935, and 1936 to be arbitrary, unlawful,

excessive, and unconstitutional, and had enjoined defend-

2

ants (State Tax Commissioner, Treasurer, and Attorney

General, of New Jersey) from enforcing collection of more

than seventy per cent of the taxes levied thereon, without

prejudice to any right to revalue and tax the property

according to law. As the cases were argued together and

disposed of by one opinion of the court below, only one peti-

tion is filed.

Summary Statement of the Matters Involved.

For each of the tax years 1934, 1935 and 1936, the rail-

road properties in New Jersey operated by the several

petitioners were assessed at valuations which the peti-

tioners claimed to be arbitrary and grossly excessive.

The State Tax Commissioner valued the railroad lands

of petitioners, located in the State of New Jersey, on the

basis of the value of non-railroad contiguous lands and all

railroad improvements (grading, fill, rails, ties, bridges,

signals, structures, etc., etc.) on the basis of estimated

original costs less physical depreciation. No consideration

whatsoever was accorded other elements of value, such as

earnings. Having exhausted their administrative remedies

without avail, the petitioners filed suits in the United States

District Court, alleging that the valuations, on which the

taxes were computed, were arbitrarily and improperly

made and grossly excessive, thus depriving petitioners of

their property in violation of the Fourteenth Amendment

(a) Since these proceedings were instituted the following com-

panies have been placed in the hands of trustees under section 77

of the bankruptcy act:

Erie Railroad Company, and

New Jersey & New York Railroad Company; also

New York, Susquehanna & Western Railroad Company,

and

Central Railroad Company of New Jersey (parties to the

proceedings below, but not to this present petition).

3

and constituting an undue burden on interstate commerce.

The petitioners prayed for injunctions against the threat-

ened enforcement of such percentage of taxes predicated

on these valuations as was found to be excessive and illegal.

Evidence introduced by the petitioners, including testi-

mony of fact and expert witnesses and complete statistical

and other data in the form of exhibits, showed the true

value of the properties to be one-third to one-half of the

assessments for the years in question (R. I,* 37, 50 et seq.).

The defendants did not produce any evidence (other than

the assessments themselves) purporting to show the value

of the several properties or purporting to support the

assessed valuations.

The District Court filed findings of fact (R. I, 83); and

conclusions of law (R. I, 89), in connection with its opinion

(R. I, 13), holding that the assessment valuations were

arbitrarily made in disregard of the earnings of the respec-

tive railroad properties; and that they ‘‘are arbitrary,

capricious, basically unsound, and so grossly excessive as

to amount to constructive fraud’’, and constitute a denial

of due process of law (R. I, 91). The District Court also

held that the plaintiffs (petitioners) were entitled to injune-

tions with respect to 30% of the taxes levied, pending cor-

rection of the assessments on a lawful basis.

There were also involved certain special defenses inter-

posed by defendants, upon which the District Court ruled

(R. I, 89) that

(a) the actions instituted by plaintiffs were not brought

to restrain proceedings in a state court within the mean-

ing of section 265 of the Judicial Code (28 USCA 379) ;

*The transcript is contained in four volumes, and in each

instance where reference is made to the Record the volume is

indicated by Roman numeral.

4

(b) the actions are not against the State of New Jersey

within the purview of the Eleventh Amendment to the

Constitution ;

(c) the issues were not res adjudicata by reason of a

judgment of the state court in an action involving assess-

ments for an earlier year.

The Circuit Court of Appeals, Third Circuit, reversed

the judgments of the District Court and remanded with

instructions to dismiss the complaints on the ground that

the case of Nashville, etc. Ry. Co. v. Browning, 319 U. S.

362, had in effect overruled the earlier decision in Great

Northern Ry. Co. v. Weeks, 297 U. S. 135, and thereby

closed the doors of the Federal Courts to any grievance

founded on arbitrary and excessive tax assessments. The

Circuit Court of Appeals on the collateral issues mentioned

above further held that these suits were barred by Section

265 of the Judicial Code because their purpose was to

restrain proceedings in a state court; that the suits were

in effect against the State of New Jersey and therefore pro-

hibited by the Eleventh Amendment; and that the issues

were res adjudicata because the New Jersey Supreme

Court in Central Railroad Company etc. vs. Martin, 114

N. J. L. 69 (a case involving alleged excessive assessments

for 1933), had adjudicated similar issues relating to the

valuations for that year adversely to the petitioners.

The Questions Presented Are:

1. Does the valuation of railroad property without

regard to its earning power, resulting in excessive assess-

ments, constitute arbitrary valuation and a denial of due

process of law?

5

2. When state officials have valued and taxed railroad

property in an alleged arbitrary manner at excessive

amounts and serve notice on the owner of intention to

obtain an order from a judge to sell such property for

such taxes, prior to a judicial inquest as to their validity,

are such contemplated or threatened steps within the mean-

ing of Section 265 of the Judicial Code, providing that

injunction shall not issue to stay proceedings in a state

court?

3. Is a suit against administrative officers to prevent

the sale of railroad property for taxes based on alleged

arbitrary and excessive valuations a suit against a state

and so prohibited by the Eleventh Amendment to the

Constitution?

4. Where a state court has held that a complainant has

failed to prove allegations of excessive assessments of rail-

road property for a particular year, does such judgment

sustain a plea of res judicata in subsequent actions insti-

tuted in a Federal Court by the same parties with respect

to assessments in different amounts for later years?

Reasons for Granting the Writ.

1. These cases present important open questions of

law, and the issues are of such a grave and serious charac-

ter as to justify the consideration and judgment of this

court.

2. The Circuit Court of Appeals has erred in constru-

ing the opinion of this Court in Nashville, etc. Ry. Co. v.

Browning, 310 U. 8S. 362, as having in effect overruled the

: et

6

earlier opinion of this Court in Great Northern Ry. Co. v.

Weeks, 297 U. S. 135.

3. The Circuit Court of Appeals for the Third Circuit

has ruled in conflict with the decision of this Court in Great

Northern Ry. Co. v. Weeks, 297 U. 8. 135, and in conflict

with the decision of the Circuit Court of Appeals for the

Eighth Circuit in the case of Bailey v. Megan, 102 Fed.

(2d) 651, in holding that the excessive valuation of railroad

property for taxation resulting from a total disregard of

earnings as a valuation factor does not constitute a denial

of due process of law under the Fourteenth Amendment.

4. The Circuit Court of Appeals has ruled in conflict

with applicable decisions of this Court in holding that these

suits (a) seek to enjoin proceedings in a state court;

(b) are suits against the State of New Jersey; and (c)

present issues which have been ee fully adjudi-

cated against the petitioner. .

Prayer.

Wherefore, your petitioners respectfully pray that this

Court issue writs of certiorari, directed to the Circuit

Court of Appeals for the Third Circuit, requiring that

Court to certify and to send to this Court for its

review and determination, on a day certain to be named

therein, a full and complete transcript of the records

in the cases on its docket which are entitled as set

forth above and numbered 7349-7354 inclusive, 7357-7362

inclusive, and 7365-7370 inclusive, October Term, 1940, re-

spectively; that upon such review and determination, the

opinion and decrees of the said Court of Appeals filed in

|

the above entitled cases may be reversed by this Honorable

Court.

7

LenicH Vauuey Rartroap Company

DetawarE, LACKAWANNA AND WESTERN RariRoaD

ComPany

Err Rarroap ComPpANy

New Jersey & New York Rarroap Company

New York Centrau Ramroap Company

New York & Lone B

a/

‘

Counsel.

8

Certification.

I hereby certify that I am a member of the Bar of the

Supreme Court of the United States; that I am Counsel

for the petitioners in the above entitled cause; that the

foregoing petition has been prepared in accordance with

the request of the petitioners; that the allegations in said

petition are true to the best of my knowledge and belief ;

that said petition is not made for the purpose of delay or

prolongation of litigation and is, in my opinion, well

founded in law and in fact, and should be granted.

Maximiian M. Stratum