This suit was brought in the federal District Court for North Dakota by petitioner against the state tax commissioner and the auditors and treasurers of thirty counties to enjoin collection of about 40 per cent. of 1933 taxes laid upon its railroad properties in each county. The assessed value of all petitioner's railroad property in the state is $78,832,888. The total of the tax is $1,508,352.34, of which petitioner has paid about 60 per cent. The suit is grounded upon the claim that the tax § are based on a valuation that includes properties located outside the state and in other respects are so excessive and arbitrary as to be repugnant to the due process and equal protection clauses of the Fourteenth Amendment to, and the commerce clause (article 1, § 8, cl. 3), of, the Federal Constitution. Issues were joined, the case was tried, the court made findings of fact, concluded that petitioner was not entitled to relief, and dismissed the bill. The Circuit Court of Appeals affirmed. 77 F.(2d) 405.
The state law requires that all property subject to taxation be assessed at its true and full value in money. Comp. Laws 1913, § 2122, as amended by Laws 1925, c. 206, § 2. The state board of equalization is required in August of each year to assess at its actual value every railroad within the state and it is governed by the rules that apply to township assessors in valuing other property. Section 2242. 1925 Supp. § 2141a3. The average values per mile of main and branch lines, respectively, constitute the bases for assignment of value to counties. Section 2243. And on like mileage bases the value given to each county is distributed to its cities, towns, townships, and districts through which the railroad extends. Section 2244. The railroad property is taxed, as is personal property, by applying the local rate to 50 per cent. of the assessed value. Petitioner did not allege that other property was not assessed at its full and true value as required by state law and does not seek relief on the ground of discrimination.
Petitioner claims that the board made the assessment by attributing to North Dakota too great a proportion of a grossly excessive system valuation. More specifically its contentions are: (1) That, by reason of the methods employed for the ascertainment of the percentage of system value to be assigned to North Dakota, the assessment includes the value of property located in other states to the extent of approximately $20,000,000, and (2) that, even if the factors used to make the allocation be not condemned, the assessment must nevertheless be held arbitrary and excessive to the extent of $15,000,000.
The full and true value of the property is the amount that the owner would be entitled to receive as just compensation upon a taking of that property by the state or the United States in the exertion of the power of eminent domain. That value is the equivalent of the property, in money paid at the time of the taking. Olson v. United States, 292 U.S. 246, 254, 54 S.Ct. 704, 78 L.Ed. 1236. The principles governing the ascertainment of value for the purposes of taxation are the same as those that control in condemnation cases, confiscation cases, and generally in controversies involving the ascertainment of just compensation. West v. Chesapeake & P. Tel. Co., 295 U.S. 662, 671, 55 S.Ct. 894, 79 L.Ed. 1640.
In determining the amount of the assessment, the board was not bound by any formula, rule, or method, but for guidance to right judgment it was free to consider all pertinent facts, estimates, and forecasts and to give to them such weight as reasonably they might be deemed to have. Courts decline to disturb assessments for taxation unless shown clearly to transgress reasonable limits. Overvaluation is not of itself sufficient to warrant injunction against any part of the taxes based on the challenged assessment; mere error of judgment is not enough; there must be something that in legal effect is the equivalent of intention or fraudulent purpose to overvalue the property and so to set at naught fundamental principles that safeguard the taxpayer's rights and property. Rowley v. Chicago & N.W.R. Co., 293 U.S. 102, 109-111, 55 S.Ct. 55, 79 L.Ed. 222. The assessment is presumed to have been rightly made on the basis of actual value. Its validity must be tested upon consideration of the facts established by the evidence and of those of which judicial notice may be taken.