The opinion of the court was delivered by: FORMAN
This litigation is a sequel to that brought by some of the present plaintiff companies involving taxes for the year 1932, the disposition of which, by this court, is reported in Lehigh Valley Railroad Co. of New Jersey et al. v. Martin, Tax Commissioner of State of New Jersey et al., etc., 19 F.Supp. 63 et seq., and involving taxes for the year 1933, as reported in Central Railroad Co. of New Jersey v. Martin, Tax Commissioner of New Jersey et al., and six other cases, D.C., 19 F.Supp. 82 et seq., affirmed, Lehigh Valley Railroad Co. v. Martin, Tax Commissioner, 3 Cir., 100 F.2d 139; certiorari denied, 306 U.S. 651, 59 S. Ct. 592, 83 L. Ed. 1049.
Over opposition preliminary injunctions were granted in this court restraining the authorities from collecting above sixty per cent of the taxes for the years 1934 and 1935 as reported in Central Railroad Co. of New Jersey v. Martin, D.C., 19 F.Supp. 84. Similar restraining orders were entered to cover the year 1936.
Answers were filed by the defendants and on final hearing all of the cases were consolidated for trial, upon which a huge volume of testimony was offered.
The pertinent provisions of the Railroad Tax Act are as follows:
"The state tax commissioner shall sit at Trenton on the first Tuesday of March in each year, and as often during the year and at such places as his duties may require for the purpose of ascertaining the true value, as of the first day of January preceding, of all property used for railroad or canal purposes of each railroad and of each canal company in this state, including its franchises, and he shall, in such ascertainment, ascertain:
"I. The length and value of the main stem of each railroad, and of the waterway of each canal and the length of such main stem and waterway in each taxing district;
"II. The value of the other real estate used for railroad or canal purposes in each taxing district in this state, including the roadbed (other than main stem), waterways, reservoirs, tracks, buildings, water tanks, waterworks, riparian rights, docks, wharves and piers, and all other real estate, except lands not used for railroad or canal purposes;
"III.The value of all the tangible personal property of each railroad and of each canal company;
"IV. The value of the remaining property, including the franchise." Revised Statutes of New Jersey 1937, 54:22-1, N.J.S.A. 54:22-1.
For the purpose of valuing these properties for taxation the tax department maintains a separate inventory of all lands and structures of each subsidiary or owning company. These lands and structures are artificially classified and listed as first class or second class. In the first class are included all the lands and structures except depots and stations within the "main stem", which is defined as a strip of land not exceeding 100 feet in width. The second class includes all lands and structures appurtenant to the railroad outside of the 100 foot strip, but includes also the freight and passenger stations located within such strip. The inventories in use were made in 1911, and have been kept up to date by annual reports showing the addition of new and the retirement of listed facilities. There are also lists or records showing the locomotives, cars and special equipment of each railroad, and the number or percentages thereof used or present in New Jersey on certain selected test days as well as lists or records of ferry boats, tug boats, car floats, barges, etc., used in ferrying freight and passengers between New Jersey and New York.
The State Tax Commissioner each year makes a "primary" valuation which is submitted to each railroad company for examination and criticism, and later he grants a hearing on any protests which may be filed against the proposed valuation. As a result, the valuation of one or more individual items may be changed, which will affect the total of the valuation, but the grand total of the assessment figures is not open to question or modification as such. After the state tax commissioner decides on his final valuations the taxes are computed thereon. From such valuation there is an appeal to the State Board of Tax Appeals, which has power to modify or correct the assessments. Power further to review, modify or correct the assessments under a writ of certiorari is conferred upon the State Supreme Court.
Chronologically, if we take, for example, the taxes assessed for the calendar year beginning January 1, 1934, the railroads are required to report conditions as of that time to the State Tax Commissioner before March 1, 1934. These returns may be considered until November 1, 1934 when the result of the investigation and a report of the valuation is made to the railroads. The valuations are completed by the State Tax Commissioner before December 10, 1934, and they are subject to his review on the second Monday in January of 1935. Meanwhile, the average tax rate is struck from reports submitted by the local taxing districts to the State Tax Commissioner so that it may be applied to the valuations. Application may be made to the State Board of Tax Appeals to review the valuations on the third Monday of June 1935, and the taxes are due and payable on December 1, 1935. Thus, it is seen that a lapse of nearly two years occurs from the beginning of the taxable year to the date when the taxes for that year become due and payable.
Plaintiffs complain that the practice of the State Tax Department in valuing these properties for taxation results in illegal and excessive valuation. Their complaints are generally as follows:
All the lands are individually valued according to the ascertained market value of adjacent lands not used for railroad purposes.
Structures are individually valued according to the local cost of reproduction less depreciation.
The equipment, or that portion of it allocated or assigned to the State of New Jersey, is also valued according to cost less depreciation.
The franchise valuation is an estimate based on no definite figures.
Plaintiffs complain that the earnings of the railroads are not reflected in the valuations that the taxes are not computed upon true valuations of the property as required by the State Constitution and Laws, that they are excessive, discriminatory and violative of the due process and equal protection clauses of the Constitution and that the assessments impose an undue burden upon interstate commerce.
Plaintiffs further complain that in so far as the instant assessments are concerned, no attempt has been made to value a railroad as such, or to value any of the New Jersey divisions as parts of the systems to which they belong, or to ascertain the values with reference to the earnings of the systems or with relation to the value of the stocks and bonds.
The defendants contend in these suits as heretofore that this court is without jurisdiction to dispose of the controversy. The reasons therefor are substantially the same as those urged upon the court in the 1932-33 and '34 cases; namely, that a three judge court should have been convoked for its determination that an injunction if granted would be violative of Section 265 of the Judicial Code, 28 U.S.C.A. § 379, that no irreparable injury has been demonstrated, that the plaintiffs have an adequate remedy at law, that the prior decisions of this court and of the New Jersey State Court are res adjudicata and a bar to these proceedings, and finally, that the suit is against the State of New Jersey, which is prohibited by the Eleventh Amendment, U.S.C.A.Const.
We are not inclined to reconsider these jurisdictional problems in the absence of additional grounds for their application. The only new matters advanced by the defendants are founded upon the recent decision of the Supreme Court of the United States, Worcester County Trust Company v. Riley, 302 U.S. 292, 58 S. Ct. 185, 82 L. Ed. 268, and the decision of the Third Circuit Court of Appeals disposing of the appeal from this court of tax cases involving the years 1932 and 1933, Lehigh Valley R. Co. of New Jersey v. Martin, 100 F.2d 139. Worcester County Trust Co. v. Riley, supra, sustains the view that a suit against a state will not be justified unless there is a violation of constitutional rights. The Court was unable to find such an invasion and condemned the proceedings as being an infringement of the Eleventh Amendment of the Constitution, U.S.C.A. This case is not dispositive of the instant case unless there is no constitutional infringement involved herein.
The Third Circuit Court of Appeals in the cases of Lehigh Valley Railroad Company et al. v. Martin, supra, made specific observations relative to the defense of res adjudicata. Those cases originated in this court (19 F.Supp. 63; Central R. Co. v. Martin, 19 F.Supp. 82) and as hereinbefore indicated involved assessments for the calendar years 1932 and 1933. The 1933 case was previously reviewed by the Supreme Court of New Jersey upon certiorari to the State Board of Tax Appeals, Central Railroad Co. v. Thayer-Martin, 114 N.J.L. 69, 175 A. 637, and then suits involving that same year together with cases involving the 1932 assessments were instituted in this court. The 1932 assessments had advanced in the state tribunals only as far as the State Board of Tax Appeals. The parties stipulated that the 1932 cases should be determined on the record which was made at the hearing before the State Board of Tax Appeals, and reviewed by the Supreme Court of New Jersey in the cases concerning assessments for the year 1933. Thus, it was agreed that the law and facts governing both years were the same. This court determined the 1932 controversy upon its merits, but for procedural reasons dismissed the controversy in so far as the 1933 assessments were concerned. On Appeal the court stated:
"The appellees also assert that every question presented by the nine appeals is res adjudicata by reason of the decision of the Supreme Court reported as Central R.R. Co. v. Thayer-Martin, supra. There is in fact an identity of parties, issues and subject matter presented by the suits at bar and Central R.R. Co. v. Thayer-Martin, supra. The records in these cases are identical in all pertinent respects. Examination of the reported decision in Central R.R. Co. v. Thayer-Martin, shows that questions concerning both the method of assessment and alleged discrimination in making the assessments were raised and adjudicated by the Supreme Court of New Jersey. While it is true that the provisions of the Fourteenth Amendment and the Commerce Clause [U.S.C.A.Const.] were not specifically adverted to, none the less all constitutional questions raised in the court below could have been raised and rights thereunder asserted in the proceedings in the Supreme Court of New Jersey. Therefore, whether asserted or not, such questions are res adjudicata now. Fidelity National Bank v. Swope, 274 U.S. 123, 130, 131, 47 S. Ct. 511, 71 L. Ed. 959; American Surety Co. v. Baldwin, 287 U.S. 156, 167, 53 S. Ct. 98, 77 L. Ed. 231, 86 A.L.R. 298; Grubb v. Public Utilities Commission, 281 U.S. 470, 479, 50 S. Ct. 374, 74 L. Ed. 972. It is also settled that in ...