APPEALS FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF NORTH CAROLINA.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
These five cases were heard together and present largely the same questions of law. Each is an appeal from a decree entered by a federal District Court for North Carolina under § 266 of the Judicial Code denying an interlocutory injunction. In each a railroad company engaged in interstate commerce seeks to enjoin the taxing officials from collecting the ad valorem property taxes for the year 1921, imposed for local purposes, and the franchise tax imposed for state purposes. Some of the corporations plaintiff are foreign; some, domestic. One has its lines wholly within the State; four have lines also in other States. But these differences are without legal significance in this connection.The property taxes are assailed on the ground that, as assessed, they violate the equal protection clause, the due process clause, and the commerce clause of the Federal Constitution, the uniformity provision of the state constitution, and the statutory method of valuation. The franchise taxes are assailed on
the ground that the statute under which they are laid violates the commerce clause, the equal protection clause and the due process clause of the Federal Constitution, as well as the uniformity clause of the state constitution; that the amounts of these taxes were illegally calculated, in violation of the statutes of the State; and that since they are fixed by a percentage of the ad valorem valuations, they must fall because those valuations were illegally made. Many of the objections made raise questions as to the meaning and effect of recent statutes of the State which have not yet been construed by its courts; and we are reluctant to pass upon these questions. Some of the objections raise issues of fact on which the evidence is submitted by affidavit and is in certain respects conflicting. But in all the cases jurisdiction rests upon substantial federal questions. The objections to the validity of the legislation and of the assessments, whether arising out of the Federal Constitution or out of the constitution or statutes of the State, may be presented in a single suit. We must, therefore, determine state, as well as federal, questions. Michigan Central R.R. Co. v. Powers, 201 U.S. 245, 291; Greene v. Louisville & Interubran R.R. Co., 244 U.S. 499, 508; Davis v. Wallace, 257 U.S. 478. All the objections urged have been considered. We are of opinion that none of them should be sustained.The more important ones will be discussed.
The controversy arose in this way.*fn1 By the constitution of North Carolina taxation of real and personal property must be uniform and ad valorem "according to
its true value in money." In the assessments made prior to 1920 nearly all classes of property had been grossly undervalued; but the undervaluation varied greatly in degree. The Revaluation Act of 1919, Public Laws, 1919, c. 84, was passed in order to provide for new and fundamentally changed valuations of all property at full values. The valuation of real estate was to be made by county officials; that of railroad property by a state board under an application of the unit rule; and the assessment so made was to be allocated by the state board to the counties on a mileage basis.*fn2 By that act the valuations made by these taxing boards were to become effective as assessments only upon approval by the legislature. When so approved, they were to be the basis of the taxation for the years 1920 to 1923 inclusive.Revaluations of real estate and of railroads were made under that act and were approved by the legislature in August, 1920. Public Laws, 1920, c. 1. Through these revaluations the assessments of railroad property were, on the average, doubled, as compared with the assessments prevailing in 1919;*fn3 and
those of real estate were quadrupled. The aggregate assessment of all the railroad properties as revalued in 1920 was $250,587,158; the aggregate of the real estate $2,006,124,997; that of the personal property $807,866,443; and that of industrial and financial institutions $444,748,145.
The relatively larger increase in the revaluations of real estate and of other property resulted in railroad taxes for 1920 lower than had prevailed theretofore; and these taxes were duly paid. But widespread objections to continuing the 1920 revaluations as a basis for the taxation of real estate developed in the latter part of 1920. A severe depression in business had occurred; there was an abrupt decline in commodity prices, particularly farm products; and real estate values were affected by this decline. The legislature, thereupon, made provision, Public Laws, 1921, c. 38, § 28, under which, upon application of taxpayers, the 1920 revaluations of real estate could be reviewed by county boards and those of railroad property by the state board. These boards were authorized to make corrections wherever assessments were found to exceed existing values. By proceedings under the Act of 1921 reductions were made in 67 counties, varying from 1 to 50 per cent. in the valuations of real estate (including that belonging to the railroads not used in the transportation service). In 33 counties no reduction in the valuations of real estate was allowed. The legislature of 1921 had made no provision for reviewing the revaluations of personal property; and the assessments thereon remained unchanged, although the valuations of personalty had also been greatly increased in 1920. Under the Transportation Act, 1920, the Interstate Commerce Commission issued, in the latter part of 1920, orders pursuant to Ex parte 74, Increased Rates, 58 I.C.C. 220, raising freight rates in North Carolina 25 per cent. and passenger rates 20 per cent. over those prevailing when the revaluation of 1920
was made. Thereafter, the five railroads applied to the state board for reduction of their valuations as the basis for taxation in 1921 and subsequent years.The application of the Norfolk & Southern was granted in part; and its assessment was reduced from $27,023,462 to $22,840,932. But, after due hearing, and rehearings, the state board refused to modify the assessments of the ...