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THE

PACIFIC REPORTER

VOLUME 144

(26 Idaho, 455)

NORTHERN PAC. RY. CO. v. CLEARWATER COUNTY et al.

(Supreme Court of Idaho. Nov. 4, 1914.) 1. TAXATION (§ 611*)-ILLEGAL ASSESSMENT ACTION TO ENJOIN-SUFFICIENCY OF COMPLAINT-DISCRIMINATION BY ASSESSOR.

Where a railroad company is the owner of about 4,000 acres of land, consisting of about 100 40-acre tracts distributed over a county and in many different sections, and it is alleged in the complaint that the assessor, "by a systematic, intentional, and illegal method of assessing said land, placed thereon a valuation and assessment which, after being equalized by the state board of equalization, exceeded the full cash value of the property by 25 per cent.," and that other and similar land of the same value in said county was assessed and valued at 75 per cent, less than the appellant's lands,

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and that said valuation and assessment were placed on appellant's lands by the assessor without making any investigation whatever and in violation of law and of the rights of appellant, and said valuation and assessment were made with the design, systematic and illegal effort on the part of the assessor to unjustly and unlawfully discriminate against appellant and its property, held, that said allegations show an unlawful, illegal, and fraudulent discrimination by the assessor in assessing said property.

[Ed. Note.-For other cases, see Taxation, Cent. Dig. §§ 1242, 1245-1257; Dec. Dig. § 611.*]

2. TAXATION (§ 608*)-ILLEGAL ASSESSMENT -RIGHT TO ENJOIN.

In this class of cases courts of equity will not interfere to correct mere errors of judgment as to valuation of property, since value is a matter of opinion; but where the allegations of the complaint show that the officer refused to exercise his judgment, and by an arbitrary and capricious exercise of official authority has fraudulently attempted to defeat the law, instead of enforce it, a court of equity will relieve against such illegal and fraudulent actions of an assessor.

[Ed. Note. For other cases, see Taxation, Cent. Dig. §§ 1230-1241; Dec. Dig. § 608.*] 3. TAXATION (§ 611*)-ILLEGAL ASSESSMENT ACTION TO ENJOIN-SUFFICIENCY OF COMPLAINT-DISCRIMINATION BY ASSESSOR.

Held, that the facts alleged in the complaint, if proven, would establish fraud as a conclusion of law.

[Ed. Note.-For other cases, see Taxation, Cent. Dig. §§ 1242, 1245-1257; Dec. Dig. 611.*]

4. TAXATION (§ 608*)-FRAUDULENT ASSESSMENT-RIGHT TO ENJOIN.

property at more than double what he assessed other property of the same class and value, he perpetrates a fraud from which a court of equity, upon proper application, will relieve.

[Ed. Note.-For other cases, see Taxation, Cent. Dig. §§ 1230-1241; Dec. Dig. § 608.*] 5. TAXATION (§ 611*)-FRAUDULENT ASSESSMENT-ACTION TO ENJOIN-PRESUMPTION. difference of opinion as to the value of the In this case it is not a question of a mere property, but it is a question of no opinion or judgment at all as to its value; since it is admitted by the demurrer that the assessor did intentionally and illegally assess said property at more than double what other property of the same kind and value was assessed, and the law presumes that he intended the natural inevitable effect of his acts in assessing said property. [Ed. Note.-For other cases, see Taxation, Cent. Dig. 88 1242, 1245-1257; Dec. Dig. 8 611.*] 6. TAXATION (8 608*)-ILLEGAL ASSESSMENT -RIGHT TO ENJOIN.

Equity will not relieve against an assessment merely because it happens to be at a higher rate than that of other property of the same class or kind, for the reason that absolute uniformity under an honest judgment may not be obtained; but where it is made to appear that honest judgment was not used and that an illegal and unlawful value was placed upon the property by the assessor, the injured party may obtain redress in a court of equity.

[Ed. Note.-For other cases, see Taxation, Cent. Dig. §§ 1230-1241; Dec. Dig. § 608.*] 7. TAXATION (§ 608*)-VALUATION-FRAUD. In a case where the valuation is so unreasonable as to show that the assessor must have known that it was wrong and that he could not have been honest in fixing it, held, that such a valuation is clearly a fraud upon the owner. [Ed. Note.-For other cases, see Taxation, Cent. Dig. §§ 1230-1241; Dec. Dig. § 608.*] 8. TAXATION (§ 610*) - ILLEGAL TAX-IN

CONDITION PRECEDENT

JUNCTION MENT OF TAX.

PAY

In a case of this kind the trial court should which the allegations of the complaint show are require the plaintiff to pay the amount of taxes reasonable and just before issuing any restraining order against the collection of the portion of the tax alleged to have been illegally assessed. [Ed. Note.-For other cases, see Taxation, Cent. Dig. § 1244; Dec. Dig. § 610.*]

Appeal from District Court, Clearwater County; Edgar C. Steele, Judge.

Action by the Northern Pacific Railway Company, a corporation, against the County of Clearwater and others to restrain the colHeld that, where an assessor, by a system-lection of a tax. Demurrer to complaint susatic, intentional, and illegal method, assessed tained, and plaintiff appeals. Reversed.

For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep'r Indexes 144 P.-1

Cannon & Ferris, of Spokane, Wash., and exceeded the full cash value of the property James E. Babb, of Lewiston, for appellant. J. H. Peterson, Atty. Gen., T. C. Coffin, Asst. Atty. Gen., A. A. Holsclaw, of Orofino, and G. W. Tannahill, of Lewiston, for respondents.

by 25 per cent.; that the full cash value of said property was at that time, and now is, the sum of $62,334.75; and that the valuation placed thereon by the assessor, after being equalized by the state board, was and SULLIVAN, C. J. This action was brought is the sum of $81,000. (The full cash value by the Northern Pacific Railway Company of each and every subdivision of said land against Clearwater county, its assessor, is specifically set forth in the complaint as treasurer, taxpayer, and auditor, to restrain is also the valuation and assessment placer the collection of certain taxes alleged to have thereon by the assessor.) It is also alleged been illegally assessed for the year 1913 on that it was the duty of the assessor in asabout 4,000 acres of land owned by the ap- sessing said land to actually determine, as pellant in Clearwater county, and for other nearly as possible, the full cash value thererelief; also for a preliminary writ of in- of, and that the assessor, in direct violation junction to restrain the tax collector of said of his duty in this regard, failed and negcounty and his successors in office from ex- lected to take any steps whatever to learn tending said property upon any delinquent the full cash value, but, on the contrary, list or delinquency certificates, and enjoining valued and assessed the same and all therethe defendants from advertising said prop- of at a flat and uniform valuation, and that erty for sale and from selling the same and said lands differ in character and value and from making certificates of sale, and other have no flat or uniform value; that the valurelief. ation and assessment was placed thereon by A demurrer was filed to said complaint on said assessor without making any investigafour grounds: (1) That the complaint does tion whatever to actually determine as nearnot state facts sufficient to constitute a cause ly as practicable what all the tracts of land of action; (2) that the court had no juris- and each thereof were worth in money, or diction to hear and determine said cause; the full cash value thereof, as is the duty (3) that it affirmatively appears that the of said assessor under the law, but, on the board of equalization of Clearwater county contrary, said assessor, disregarding his duty and the state board of equalization have ex- in this regard, adopted a speculative valuaclusive and original jurisdiction of the mat- tion on said lands and all thereof; that said ters alleged in the complaint, and that said valuations and assessments so made are boards have passed upon the matters alleged greater and higher than the assessments and and charged in plaintiff's complaint and ren- valuations made by said assessor on other dered their judgment thereon, and that the lands in Clearwater county of the same gensame was filed and was and is res adjudi- eral character and of the same full cash valcata; (4) that it affirmatively appears that ue, and are unfair, unjust, and unequal, as the plaintiff has not tendered the amount compared with the assessments and valuaof taxes due, owing, and unpaid, or the amount tions made by said assessor on land in the alleged in plaintiff's complaint to be just and same locality and of the same class, charreasonable, for the taxes due, owing, and un-acter, and full cash value; that all lands in paid upon said property for the year 1913. said county, save and except the lands here Said demurrer was sustained by the court, and the plaintiff elected to stand upon its complaint in said action, and declined to amend and judgment of dismissal was entered. The appeal is from the judgment.

[1] It is stated by the appellant in its brief that the court sustained the demurrer for the reason that the court was of the opinion that fraud was not alleged in the complaint, and for that reason the complaint did not state facts sufficient to warrant a court of equity in taking jurisdiction of said matter. It is alleged in the complaint, in substance, that the appellant is the owner of some 4,000 acres of unimproved land situated in Clearwater county, and said land is specifically described by an exhibit attached to the complaint, wherein it appears that said land consists of about 100 40-acre tracts scattered throughout said county situated in many different sections; that the assessor, by a systematic, intentional, and illegal method of assessing said property, placed thereon a valuation and assessment which, after being

in controversy, are valued and assessed by said assessor at only 50 per cent. of their full cash value; that the valuation and assessment made by said assessor against the property of appellant is 25 per cent. more than its full cash value, and is unfair, unequal, and unjust, and the plan and scheme adopted by said assessor in assessing appellant's property at 25 per cent. in excess of its full cash value, and in assessing all other lands in said county at only 50 per cent. of their full cash value, is in violation of law and of the rights of appellant, and is the result of design and a systematic effort on the part of said assessor to unjustly and unlawfully discriminate against appellant and its property; that appellant, for the purpose of having the said valuation so made by the assessor reduced to the full cash value of said property, as required by law, did on or about the 26th of July, 1913, and within the time required by law, and while the board of equalization of Clearwater county was in session, make application to said

overvaluation of appellant's hundred or more different tracts of land, and the undervaluation of all other property in the county, and where the difference between the valuation of property so made amounts to 75 per cent. against appellant.

The trial court, in sustaining the demurrer, said:

"I have no doubt but that a court of equity may take hold of these matters, but it is only on one condition; that is, only when the facts are stated which invoke the powers of a court of equity. There must be either fraud or such. facts as show the badge of fraud, or the court will not take hold of it. There is not a single allegation in this case that even squints at a fraud."

said board refused to make any reduction, mitted that the discrimination is due to whatever from the valuation and assessment systematic and intentional and unlawful placed upon said property, and denied appellant's application and the whole thereof; that the total tax upon said property, after being equalized by said state board of equalization, has been extended upon the assessment roll for Clearwater county, and amounts to the sum of $1,293.99, and that a just and fair proportion of said tax of $1,293.99, as compared with the valuation and assessment of all other lands in the county of Clearwater, is the sum of $485.25, which sum was tendered by appellant and refused prior to the commencement of this action. The appellant also alleges that the assessor threatens to claim a penalty of 10 per cent. in addition to the said tax of $1,293.99, and further threatens to make out delinquent certificates for the year 1913 covering the property here involved, and that said delinquent certificates will be sold by the defendant county auditor, all of which will cause a cloud upon appellant's title and cause great and irreparable damage; that the appellant has no plain, speedy, or adequate remedy at law, and that, if appellant should pay said alleged tax of $1,293.99, as claimed by defendants, the same would be distributed and apportioned to the clerk of each incorporated city, town, or village, and each independent school district and every other tax district having a treasurer in said county of Clearwater, and also to the state of Idaho, and this would require appellant to bring a multiplicity of suits to recover the sum so paid in excess of $485.25, the amount which appellant alleges is legally and justly due. The complaint contains the usual prayer for relief in an action of this character.

Under the well-established rule, on demurrer to the complaint all facts well pleaded in the complaint are admitted. The question presented is whether or not appellant is entitled to any relief at the hands of a court of equity where it is admitted that appellant's property, consisting of about 4,000 acres of land, consisting of many separate tracts in various parts of the county, has been by a systematic, intentional, and illegal overvaluation assessed at 25 per cent. over its full cash value, and at the same time all other lands in said county were assessed at 50 per cent. of their full cash value; and where it is also admitted that such assessment so made by the assessor was with the design and systematic effort on his part to unlawfully and unjustly discriminate against appellant and its property. Stated in another way: Is the discrimination alleged in this case, amounting to 75 per cent. so unreasonable as to amount to a constructive fraud upon appellant? It must be borne in mind that this is not a case of occasional or accidental discrimination which might be attributed to the fallibility of human judgment, a mistake, or other accidental cause, but it is a case where it stands ad

While it is true the word "fraud" does used in the complaint charges fraud on the not appear in the complaint, the language part of the assessor as clearly as if it had used it a dozen times, and the using of the word "fraud" would not add anything to the complaint. It is alleged that said discrimination is due to the "systematic, intentional, and unlawful valuation" of the property, and the undervaluation of similar property of others situated in said county. difference of 75 per cent. is alleged.

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The precise question presented here was before the Supreme Court of Washington in the case of Andrews v. King County, 1 Wash. 46, 23 Pac. 409, 22 Am. St. Rep. 136. the complaint in that action it was alleged, among other things, that the assessor uniformly assessed demands secured by mortgages on real estate at their par value, and uniformly assessed lands, improvements, and personal property at from one-tenth to one-fourth of their actual cash value. demurrer was sustained to the complaint, plaintiff elected to stand upon the complaint, and the action was dismissed. The ruling of the court on said demurrer was reversed on appeal, and in the course of the decision the court stated that in the investigation of the case there were three leading propositions to be considered, viz.: First. In order to put in issue the question of fraud, is it neces sary to allege in terms that defendants were Second. guilty of fraud? Conceding the allegations in the complaint to be true, are the facts there stated sufficient to establish Third. Had a prima facie case of fraud? the plaintiff any other remedy than the one invoked? And the court said:

"So far as the first proposition is concerned, plaint alleges a state of facts, which, if proved we are clearly of the opinion that if the comto be true, would establish fraud as a conclusion of law, that it is a sufficient allegation of fraud; and that the declaration of the pleader that such acts were fraudulent, is in no wise essential or necessary to put the question of fraud in issue."

The court then states that the essential idea of the statute is that each person shall pay a tax in proportion to the value of his property, and the fact that plaintiff's prop

erty is admitted to be assessed at its par value will not deprive him of the constitutional guarantee, if by the undervaluation tional guarantee, if by the undervaluation of other property he is compelled to bear more than his just proportion of the burden of taxation, and, after stating two cases or propositions, says:

"The just principle of taxation is equally violated in both cases; and the constitutional mandate that 'all taxes shall be equal and uniform, and that the assessment shall be according to the value of the property,' is equally ignored. *** Nor will courts of equity interfere to correct errors in judgment as to valuation, because, as has been well said by Judge Cooley, 'value is matter of opinion, and when the law has provided officers upon whom the duty is imposed to make the valuation, it is the opinion of those officers to whch the interests of the parties are referred.' But, according to the same learned author, 'it is possible, however, that there may be circumstances under which the action of the officers will not be conclusive.' Cooley, Taxation, 218. And one of those circumstances is where the officer refuses to exercise his judgment, and by an arbitrary and capricious exertion of official authority, seeks fraudulently to defeat the law, instead of enforcing it. In such a case the taxpayer will not be left completely at the mercy of the assessor."

And the court further concludes from the allegations of that complaint that:

"The conclusion is inevitable that the honest judgment of the officer was not exercised; and that a rule or system of valuation was adopted by the assessor, and confirmed by the board of equalization, which was designed to discriminate unfairly against one class of taxpayers, and which was in plain contravention of the constitutional law which provides that 'all taxes shall be uniform, and that the assessment shall be according to the value of the property.'"

[2] The court there states that the uniform rule of the higher courts has been that, while equity will not interfere to correct mere mistakes or inadvertences, or to contravene or set aside the judgment of assessors or boards of equalization in relation to values, it will interfere when the officers fraudulently, capriciously, or tyrannically refuse to exercise their judgment by adopting a rule or system of valuation designed to operate unequally and to violate a fundamental principle of the Constitution.

[3] The complaint under consideration does not use the words "fraudulently," "capriciously," or "tyrannically," but uses language equally as strong. The assessor is charged with a systematic design and effort to unjustly and unlawfully discriminate against appellant and its property. If that language does not mean that the officer fraudulently, capriciously, and tyrannically did the acts complained of, then we are not able to understand the English language. The facts pleaded in the case at bar established fraud as a conclusion of law, and had the complaint contained the allegations that these acts were fraudulent, capricious, and tyrannical, it would not strengthen the complaint or be in any way essential.

It was said in Louisville Trust Co. v.

"If the allegations of the bill are made out, there exists in respect to the property of complainant, and others similarly situated, a systematic, intentional, and illegal undervaluation of other property by the taxing officers of the state, which necessarily effects an unjust displaintiff is the owner, and a bill in equity will crimination against the property of which the lie to restrain such illegal discrimination, and that in such cases federal jurisdiction will arise because of the equal protection of the laws guaranteed by the fourteenth amendment.'

[4, 5] When an assessor does, by a systematic, intentional, and illegal method, assess one owner's property at more than double what he assesses other property of the same class and value, he perpetrates a fraud from which a court of equity on proper application will relieve. Here is alleged an illegal and fraudulent discrimination on the part of the assessor in making said assessments; that he did not exercise the judgment required by law to be exercised by him in making such assessments. Said assessments were designed to operate unequally and to violate a fundamental principle of the Constitution and statute, and equity may properly interfere to restrain the operation of this fraudulent and illegal exercise of power by the assessor. Said assessment was not made because of any defect or difference in judgment, but was made intentionally and illegally in order and for the purpose of effecting an unjust discrimination against the property so assessed. It is not a question of mere difference of opinion as to the value of the property, but it is a question of no opinion or judgment at all as to its value. It is admitted that it was made intentionally and illegally at more than double what other property of the same kind was assessed.

It was held in Humbird Lumber Co. v. Thompson, 11 Idaho, 614, 83 Pac. 941, that:

"If the plaintiff has shown by its complaint that its property has been unfairly assessed by defendant, Thompson, as assessor of K00tenai county, in any manner whatever, or that it has been assessed in excess of its actual cash value, then it certainly has a remedy."

It is admitted by the demurrer that appellant's property has been unfairly assessed; that it has been assessed at more than double what other similar property has been assessed in said county, and that such assessment was made illegally and intentionally so, with intent to disregard the law.

In Atchison Ry. Co. v. Sullivan, 173 Fed. 456, 97 C. C. A. 1, referring to the assessor, the court said:

"His acts, nevertheless, were in violation of the statute; their natural and inevitable effect was to diminish the burden of taxation upon the property within his jurisdiction and to increase it upon the railroad property; and, however innocent in actual intent he may have been, his acts were as injurious to the owners of railroad criminate against them, and the law conclusive property as if he had actually intended to disly presumes that he intended the natural and inevitable effect of his deeds."

And, referring to the assessor and county commissioners acting as a board of equaliza

"It was sufficient to sustain its cause that they intended to disregard the law, and that the natural and inevitable effect of that violation was the increase of its share of the burden.

A systematic and intentional under or over assessment of one or more classes of property in violation of the law, whereby one or more classes of property is to be made to bear an undue proportion of the burden of taxation, presents a good cause of action for relief from the payment of the unjust part of the proposed tax."

And the court holds that the acts shown there amounted either to intentional fraud upon the complainant or to such a gross mistake that it was a fraud in law.

The discrimination alleged in this complaint does not come or result from a mistake in judgment, but does, as in effect alleged, result from a systematic, intentional, and illegal disregard of the law by the assessor. The case of Taylor v. Louisville Ry., 88 Fed. 350, 31 C. C. A. 537, is an instructive case, and reviews many cases upon the subject under consideration, and says:

"They [the cases reviewed] merely emphasize the point that equity will not relieve against an assessment merely because it happens to be at a higher rate than that of other property; that such inequalities, due to mistake, to the fallibility of human judgment, or to other accidental causes, must be borne, for the reason that absolute uniformity cannot be obtained; that, in other words, what may be called 'sporadic cases of discrimination' cannot be remedied by the chancellor."

And it holds that the chancellor can only interfere when it is made clear that there is with respect to certain species of property a systematic, intentional, and unlawful undervaluation of property for taxation by the taxing officers which necessarily effect an unjust discrimination against the species of property of which the complainant is an owner. And further on the court said:

"The interference by the chancellor in the case at bar and in the Cummings Case rests on something equivalent to fraud in the tribunal imposing the tax."

In that case the property of the plaintiff was only assessed at its full value, while here it is admitted that the property of the appellant is assessed at 25 per cent. in excess of its full cash value, and other property of a similar character and value is assessed at 50 per cent. less than its full cash value, and both cases-to wit, the assessment of appellant's property at 25 per cent. more than its cash value, and the assessment of similar property at 50 per cent. less than its cash value-show a systematic, intentional, and illegal discrimination from which a court of equity ought to grant relief.

[6, 7] While exact equality and uniformity may not be had in the assessment of property, and while the mistakes and omissions of the assessor may not at all times be the subject of adequate remedy of the courts, yet for the gross injustice and violation of the law complained of in this action there ought to be some remedy, and there is a remedy. The discrimination alleged in the complaint

is so unreasonable, so unjust-so intentionally unjust-as to amount in law to constructive fraud upon the appellant.

There is a clear distinction between this case and Humbird Lumber Co. v. Thompson, supra. In that case there was no contention that the discrimination there charged was the result of systematic, intentional, and unlawful effort on the part of the assessor to illegally assess the property there involved. It is contended by both the Attorney General and the other attorneys for respondent that, since this case does not involve a class of persons or a class of property, the court has no jurisdiction to grant relief; that a court can only grant relief where there is a class of property or the interests of a number of property owners involved.

In Otter Tail County v. Batchelder, 47 Minn. 512, 50 N. W. 536, it was sought to be shown that, while the lands in general in the township referred to were assessed at less than one-half of their value, the unimproved lands of the defendants were assessed at nearly 50 per cent. above their value. The defendants owned a number of different tracts of land, and the court held that such proof should be considered in connection with the circumstances that this inequality was not with respect to a single tract of land, which might more readily be accounted for on the ground of error of judgment, but to nearly 60 different tracts owned by those nonresident defendants, and the court said:

"Such facts being shown, it would be difficult, in the absence of opposing proof or explanation, to escape the conclusion that the assessment had been intentionally made without regard to the requirements of the law, and upon a basis of systematic inequality," and thereupon reversed the case."

In the case at bar there are at least 100 distinct 40-acre tracts distributed over Clearwater county involved, and that brings this case virtually within the rule above stated. See, also, Dickson v. Kittitas County, 42 Wash. 429, 84 Pac. 855.

It was held in First National Bank v. Holmes, 246 Ill. 362, 92 N. E. 893, that if property is arbitrarily assessed fraudulently at too high a valuation, a court of equity will interfere to protect a taxpayer in his constitutional rights. It was also there held that, where the property of corporations was assessed so far above the property of individuals as to justify the inference of intent to require them to pay more taxes in proportion to the value of the property than private owners, a court of equity would grant relief. Common experience teaches that the judgment of reasonable men will differ as to the value of property, and mere undervaluation or overvaluation, unless glaring and gross, is not sufficient evidence of fraudulent intent; but in a case where the valuation is so unreasonable as to show that the officer must have known that it was wrong, and that he could not have been honest in fixing

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