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21 F.(2d) 351

out passing over the Missouri Pacific's rails until it reaches Paris, Ark., complainant's western terminus and only point of direct interchange with the Missouri Pacific. As to traffic so moving, the latter carrier would be only an intermediate or delivering line."

In its opinion the Commission said further:

"As to the question of public interest, the Missouri Pacific asserts that the traffic gained by complainant through the establishment of the additional routes would be primarily at its expense; that it is not paying dividends, nor earning a fair return on its property investment. The Missouri Pacific contends that we cannot lawfully grant the relief here sought solely on the ground of complainant's financial necessity, and that the public interest referred to in the statute is that of the shipping public in reasonable, expeditious

routes.

"Such a narrow conception of the public interest we are unable to adopt. It should be remembered that in their present form the provisions of section 15, governing the establishment of through routes and joint rates, were enacted as part of the Transportation Act of 1920, and that they lay upon us the mandatory duty of establishing such routes and rates as may be found to be necessary or desirable in the public interest, whereas the corresponding statutory provisions in effect prior thereto did not."

The Commission further said in that report:

"The need of complainant and the benefit which it would derive from the proposed routes far outweigh any possible adverse effect upon the Missouri Pacific from the establishment of such routes. However, it is unnecessary in this case to rely solely upon the financial needs of complainant, for the reasons stated below.

"In Ft. Smith, S. & R. I. R. R. Co., supra, it was found that complainant's line was economically operated and of great benefit to the country which it serves, although its revenues had been insufficient to meet its operating expenses and fixed charges. As further pointed out in that report, the distance between Memphis, Tenn., and Ft. Smith, over the route which complainant seeks to have established, is approximately the same as that over the Missouri Pacific alone, and there is nothing to show that any of the other routes sought would be unduly circuitous. Some of them would be shorter than existing routes. At the hearing in No. 13850, a number of shippers along complainant's line as well as from points served by the Paris branch of

21 F. (2d)-23

the Missouri Pacific, testified for complainant, and there is ample proof that the routes sought would be of value to those shippers in many respects.

"Upon further consideration of the record, we are of opinion and find that the through routes and joint rates prayed for in the complaint and more particularly described in the order attached hereto are desirable, in the public interest, and an order requiring their establishment will be entered."

As sustaining its findings and conclusion, the Commission relies upon the cases of Dayton-Goose Creek R. Co. v. U. S., 263 U. S. 456, 44 S. Ct. 169, 68 L. Ed. 388, 33 A. L. R. 472, and United States v. Abilene & S. R. Co., 265 U. S. 274, 44 S. Ct. 565, 68 L. Ed. 1016. In the first of the above cases the Supreme Court was considering the constitutionality of the recapture paragraphs of the Transportation Act of 1920. In the second of those cases the court was considering the question of division of joint rates and, in making such division, the right of the Commission to take into consideration the financial needs of a weaker road. Neither one of those two propositions is involved here. The portions of the Transportation Act applicable to the facts in this case are paragraphs 15 (3) and 15 (4) of section 418 of the Transportation Act of 1920, 41 Stat. 485 (49 USCA § 15).

Paragraph 15(3) authorizes the Commission to establish through routes, when deemed necessary by it, or desirable in the public interest. Paragraph 15 (4) is a limitation on the authority granted in paragraph 15(3). That limitation reads as follows:

"In establishing any such through route the Commission shall not (except as provided in section 3, and except where one of carriers is a water line), require any carrier by railroad, without its consent, to embrace in such route substantially less than the entire length of its railroad and of any intermediate railroad operated in conjunction and under a common management or control therewith, which lies between the termini of such proposed through route, unless such inclusion of lines would make the through route unreasonably long as compared with another practicable through route which could otherwise be established; provided, that in time of shortage of equipment, congestion of traffic, or other emergency declared by the Commission it may establish temporarily such through routes as in its opinion are necessary or desirable in the public interest." It is clear that the order of the Commission does not come within the proviso above

quoted, because the emergency has not been found by the Commission. The Commission has expressly found that the through lines of the Missouri Pacific were not unreasonably long, so as to require the route sought to be established in the order. If either Ft. Smith

or Paris is the western terminus of the proposed route, the Missouri Pacific has through lines to each one of those points from all Eastern points involving interstate traffic. In the order of the Commission all of these lines are excluded from consideration, except the branch line from Ft. Smith to Paris. The order embraces substantially less than the entire length of the railroad of the Missouri Pacific between the eastern and western termini of the road involved in the order.

The proviso in the order, to the effect that no carrier shall be required to participate in any through or joint rates which would require it to surrender possession of traffic which it had originated or received from a connecting carrier, does not meet the proposition. The question is the propriety and legality of the inclusion of the Parish branch in the proposed through line. That question cannot be met by an exception with regard to the surrender of traffic. The establishment of a through route is one thing; the surrender of traffic after such route has been established is another thing. The former cannot be made dependent upon the latter. The proviso in the latter disregards the inhibition of section 15 (4). It ignores the existence of the lines of the Missouri Pacific from all of the eastern points involved.

The conclusion reached by the Commission, as set forth in its order, would in effect insert a new proviso in paragraph (4), section 15 of the Interstate Commerce Act. Such new proviso would appear just preceding the present existing proviso and would read substantially as follows: Provided, that the foregoing limitation on the power of the Commission shall not be in effect when the Commission is establishing a through route which may compel a railroad to short-haul itself, if such through route is limited to traffic not originated by such railroad, and not in its earlier possession. To read such a proviso into the present statute is, we think, legislation and not construction. If such a proviso is desirable, we think it is for the Congress to promulgate it, not the courts.

[2] The Commission has taken Memphis as a representative point. On west-bound traffic from that point under the order of the Commission, to enable the Subiaco to secure 46 miles of haul, the Missouri Pacific must lose nearly 300 miles and the Rock Island secures

over 200 miles. It does not appear that the public interest requires that the Rock Island should have the traffic at the expense of the Missouri Pacific. In addition to that loss of haul, to make the order effective, the Missouri Pacific must contribute the use of its branch line. The general term, "public interest," as used by the Commission in its concrete application, means the securing of additional revenue to the Subiaco. The public interest in the maintenance of the Subiaco as a part of the transportation system of the country does not justify the taking of a part of petitioner's line and using it as an instrumentality for producing income for the Subiaco in competition with and to the detriment of the petitioner. There might be an emergency which, under the authority given in the proviso of section 15 (4), would authorize the establishment temporarily of such a route; but that emergency has not been found, and the order of the Commission does not purport to be a temporary order.

The Commission finds that "the need of complainant [Subiaco] and the benefit which it would derive from the proposed rates far outweigh any possible adverse effect upon the Missouri Pacific from the establishment of such routes." This case goes further than the Goose Creek and Abilene Cases. In the former the recapture clause of the Transportation Act was held applicable to the cases of a carrier's revenue over "a fair net operating income upon the value of its properties which are being devoted to transportation." The court further said:

"By investment in a business dedicated to the public service the owner must recognize that, as compared with investment in private business, he cannot expect either high or speculative dividends, but that his obligation limits him to only fair or reasonable profit."

In the Abilene Case, in considering an order of the Commission with regard to a division of the rates, the Supreme Court said:

"It is settled that, in determining what the division should be, the Commission may, in the public interest, take into consideration the financial needs of a weaker road, and that it may be given a division larger than justice merely as between the parties would suggest 'in order to maintain it in effective operation as part of an adequate transportation system,' provided the share left to its connections is 'adequate to avoid a confiscatory result."

In these two cases the question of securing traffic for a weaker road did not arise. The point was the division of the income among carriers, all of which participated in

21 F.(2d) 355

the traffic. In such a division it was held that a weaker road could be favored; that is, its share of the income could be based upon facts other than the length of its mileage. In this case it was recognized that, before something could be taken from one carrier and given to another, it must appear that the former could retain such an amount as would

WESTERN UNION TELEGRAPH CO. v.
TAX COMMISSION OF OHIO et al.

AMERICAN TELEPHONE & TELEGRAPH

CO. v. SAME.

District Court, S. D. Ohio, E. D. July 28, 1927.

Nos. 465, 468.

be a fair return upon the value of its prop- I. Courts 282(3)-Suit to enjoin certifica

erty used in the transportation of the traffic.

In this case the taking is justified upon the ground that in the operation under the order the Subiaco will gain more than the Missouri Pacific will lose. This does not appear to be a sufficient reason.

The Commission also makes the following findings:

"It should be noted that complainant expressly disclaims the right to participate in routes which would deprive an initial carrier of a long haul. From most of the points of origin involved, routes in accordance with complainant's prayer can be established over which traffic may move without passing over the Missouri Pacific rails until it reaches Paris, Ark., complainant's western terminus and only point of direct interchange with the Missouri Pacific. As to traffic so moving, the latter carrier would be only an intermediate or delivering line."

tion by state tax commission of assessment as discriminatory raises "federal question" (Const. Amend. 14).

Suit to enjoin a state tax commission from certifying values of complainant telegraph company's property in the state to the auditors of the various counties in proportion to the amount of properties in such counties on the

ground of discrimination, in violation of Const. Amend. 14, raises a "federal question," within equity jurisdiction of federal court.

[Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Federal Question.]

2. Taxation 319(2)-Tax commission's fixing of values for taxation is "administrative act," but determination of property subject to taxation is "judicial act."

Fixing of values for taxation by state tax commission is exercise of administrative power, but determination by commission as to whether property is subject to taxation is exercise of judicial power.

[Ed. Note.-For other definitions, see Words and Phrases, First Series, Administrative; First and Second Series, Judicial Act.]

3. Taxation 495-Appeal from Ohlo tax commission to court of common pleas is proceeding in error, and court in reviewing determination acts judicially as well as administratively (Gen. Code Ohio, § 5611-2).

The distinction made between initial and intermediate and delivering carriers is abstract. The Commission recognizes the right of a carrier to handle traffic in its possession, and it states that a carrier has no right to traffic still in the possession of connecting lines. The result of the reasoning is that, if routes may be established by which traffic may be so handled that it will not pass over the Missouri Pacific rails until it reaches Paris, that road can have no legal ground for complaint. That such routes may be established is no doubt true, but the fact still remains that from the points considered, St. 4. Taxation 498-Telegraph companies were

Louis, Cairo, Memphis, and New Orleans, the Missouri Pacific has other lines to Paris, Ark., by way of Ft. Smith. The essential point here is whether or not the Missouri Pacific, under the circumstances, can be compelled to join in establishing such routes, when it has lines available which will give to it the longer haul. The Commission did not make the findings which would authorize it to disregard the longer lines of the Missouri Pacific, and to compel that company to contribute its Paris branch to the making of an additional through line.

The preliminary injunction heretofore granted will be made permanent.

Appeal from final determination of state tax commission to court of common pleas under Gen. Code Ohio, § 5611-2, is a proceeding in error, and the court, in reviewing such determination, acts in judicial as well as administrative capacity, and the action of the commission in fixing value at the true value in money of the property taxed is, in so far as unlawful discrimination is concerned, the final administrative act.

not required to defer suit to enjoin discriminatory assessments until after certification by tax commission to county auditors and entry of tax charges on duplicates (Gen. Code Ohio, §§ 5613, 12075; Const. Ohio, art. 12, § 2; Const. U. S. Amend. 14).

Telegraph companies were not required to defer suit in federal court to enjoin state tax commission from certifying values of their properties within the state to the auditors of the various counties, brought on ground of disation of other property in the state, in violacrimination by means of systematic undervalution of Const. Ohio, art. 12, § 2, and of Const. U. S. Amend. 14, where complainants' property was assessed at full value as required by Gen. Code Ohio, § 5613, until after certification and entry of tax charges on the duplicates of the respective counties, and then avail themselves

of the right of action under section 12075; act of certification and of placing valuation on various tax duplicates and making of necessary extensions under sections 5448-5615 being merely ministerial duties.

5. Taxation 498-Legal remedy must be clearly adequate to exclude equity jurisdiction to enjoin discriminatory tax assessment. Whether federal equity court has jurisdiction to enjoin alleged discriminatory state tax assessment depends on the adequacy of the rem, edies at law open to complainants, and adequacy of legal remedies must be clear.

6. Taxation

498-Taxpayer's statutory

right of appeal to court from tax assessment or to pay tax and sue to recover it held inadequate to bar equitable remedy (Gen. Code Ohio, $ 5611-2; Const. Ohio, art. 12, § 2;

Const. U. S. Amend. 14).

Right under Gen. Code Ohio, § 5611-2, to have tax assessment reviewed on appeal to court of common pleas in county where the largest part of taxpayer's property is situated, on which appeal taxpayer cannot raise question of discriminatory assessment in violation of Const. Ohio, art. 12, § 2, or of Const. U. S. Amend. 14, or right in the alternative to pay the tax and sue collecting officers to recover back what they unlawfully exacted, held inadequate to prevent equitable relief by injune

tion.

7. Courts 262(2)-Availability of equitable remedies in state court is immaterial on is

sue of federal court's jurisdiction, where it has jurisdiction for diversity of citizenship and federal questions.

Where federal District Court, because of diversity of citizenship, requisite jurisdictional amount, and alleged violation of Const. Amend. 14, has jurisdiction of suit to enjoin certification of value of telegraph companies' property by state tax commission to various county auditors, it is immaterial, on issue of federal court's jurisdiction, whether there is available to complainants the right of an equitable action in the state courts; party aggrieved having right to choose the forum in which he will assert his

claim.

8. Injunction 74-Mandamus 71, 72Neither injunction nor mandamus lies against executive officer as respects discretionary duties, but purely ministerial acts are subject to such control.

Neither injunction nor mandamus will lie against an executive officer to control him in discharging an official duty requiring the exercise of judgment and discretion, but such officers are subject to control of courts in so far as their purely ministerial acts affect the rights of citizens.

9. Taxation 498-Unjust discrimination in

state taxation of telegraph companies' prop

erty may be enjoined federal court (Const. U. S. Amend. 14; Const. Ohio, art. 12, § 2; Gen. Code Ohio, § 5613).

Federal District Court may enjoin certifica

tion by Ohio state tax commission of values of telegraph companies' property in the state to the auditors of the various counties in proportion to the amount of properties in such

counties for purposes of taxation on ground of discrimination in violation of Const. Amend. 14, and Const. Ohio, art. 12, § 2, in that complainants' property is assessed at full value as required by Gen. Code Ohio, § 5613, while other property in state is assessed at not exceeding 75 per cent. of its value, and an injunction will therefore issue restraining tax commission from certifying more than 75 per cent. of the amount found by it to be the value of such property, in view of sections 1465-33, 5446, 5448, 5579, 5611-1, 5612-5615.

Hickenlooper, District Judge, dissenting.

In equity. Suits by the Western Union Telegraph Company against the members of the Tax Commission of Ohio and others, and by the American Telephone & Telegraph Company against the Tax Commission of Ohio and others. On plaintiffs' motion for preliminary injunction. Motions granted.

Ireton & Schoenle, of Cincinnati, Ohio, and Francis R. Stark, Francis N. Whitney, and Samuel C. Bowman, all of New York City, for Western Union Tel. Co.

Maxwell & Ramsey, of Cincinnati, Ohio, A. E. Holcomb, of New York City, and Joseph S. Graydon, of Cincinnati, Ohio, for American Telephone & Telegraph Co.

Edward C. Turner, Atty. Gen., and Virgil H. Gibbs, Sp. Counsel, of Columbus, Ohio, for defendants.

Before MOORMAN, Circuit Judge, and HICKENLOOPER and HOUGH, District Judges.

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 definite and specific values, to the auditors of the various counties in the state, in proportion to the amount of the properties in such counties.

21 F.(2d) 355

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 systematical ly 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 1910 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.

..."

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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 case 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 an 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.

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

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