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Mr. Blewett Lee and Mr. Edmund F. Trabue, with whom Mr. Robert V. Fletcher, Mr. John C. Doolan and Mr. Attilla Cox, Jr., were on the briefs, for the Illinois Central Railroad Co.

Mr. Charles Carroll, Mr. Marvel M. Logan, Attorney General of the State of Kentucky, and Mr. John L. Rich, with whom Mr. Charles H. Morris, Assistant Attorney General of the State of Kentucky, was on the briefs for Greene et al.

MR. JUSTICE PITNEY delivered the opinion of the court.

These are appeals and cross-appeals from two final decrees of the District Court enjoining (upon certain conditions) the enforcement of franchise tax assessments for the respective years 1912 and 1913, made against the Illinois Central Railroad Company (plaintiff below in each case) by Henry M. Bosworth and others, constituting the Board of Valuation and Assessment of the State of Kentucky, who were among the original defendants, and to whose offices the cross-appellants Robert L. Greene and others succeeded pending the suits, and were thereupon brought in as parties defendant. Plaintiff being an Illinois corporation, the federal jurisdiction was invoked upon the ground of diversity of citizenship, and also of alleged infringement of plaintiff's rights under the due process and equal protection provisions of the Fourteenth Amendment; the assessments being attacked as having been made by the Board in a manner not in accordance with the state law, as including in the valuation property not within the State, contrary to the due process clause, and as being based upon a discriminatory rule of valuation as compared with other property in the State, and thus

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amounting to a denial of the equal protection of the laws. The equity jurisdiction was invoked upon the usual grounds. The pleadings are involved, and no attempt will be made to summarize them. In the case relating to the 1912 assessment, they differ somewhat from those in the case relating to the assessment for the following year; but the two cases were consolidated for the purposes of final hearing. They resulted in decrees granting relief to the plaintiff to the extent of equalization with the basis of assessment customarily adopted by assessing officers with respect to other property in the State, and denying relief upon the other grounds of complaint. Plaintiff appealed to this court in both cases upon the ground that it was entitled to more ample relief; defendants took crossappeals upon the ground that no relief ought to have been granted.

The cases were heard here together with several cognate cases, this day decided, viz: Nos. 617 and 618, Greene v. Louisville & Interurban R. R. Co., ante, 499, and Nos. 778 and 779, Louisville & Nashville R. R. Co. v. Greene, ante, 522.

The salient facts of the present cases are as follows: During the two years pertinent to the controversy, plaintiff operated a system of railroads extending throughout the State of Kentucky and ten other States, having, according to the averments contained in the bills of complaint and the proofs upon which the cases were heard, a total mileage owned, operated, leased, or controlled amounting to 4,550.54, of which 563.79 miles, or 12.3 per cent., were in Kentucky. For the year 1912, the Board of Valuation and Assessment fixed plaintiff's capital stock valuation for the State of Kentucky at $27,124,240, and deducted from this the tangible property assessment made by the Railroad Commission, $12,377,383, leaving the franchise assessment $14,746,857. The District Court granted a restraining order, followed by a preliminary

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injunction, conditioned that plaintiff should pay taxes, state and local, on a valuation of $6,618,585 (209 Fed. Rep. 465), and eventually made a final decree enjoining the enforcement of the assessment, conditioned upon plaintiff's paying taxes upon an additional valuation of $1,347,212, or $7,965,797 in all.

For the year 1913, the capital stock value fixed for Kentucky was $23,679,180, the assessed value of tangible property $12,478,903, which, being deducted, left $11,200,277 as the franchise valuation. The court granted a restraining order upon payment of taxes on on an assessment of $6,000,000, followed this with a temporary injunction upon the same terms, and made a final decree granting a permanent injunction upon condition of the payment of taxes upon $2,161,067 in addition to the $6,000,000 upon which taxes had been paid under the order for preliminary injunction.

With respect to three of the questions raised by defendants herein: (a) That the suits are not maintainable because in effect suits against the State; (b) that plaintiff has an adequate remedy at law under § 162, Kentucky Statutes; and (c) that plaintiff is not entitled to relief by way of equalization because of the undervaluation of property in general by the local assessors; these cases, like the Louisville & Nashville Cases, are controlled by the decision in Greene v. Louisville & Interurban R. R. Co., ante, 499. Upon the question of the sufficiency of the proofs to warrant the conclusion of the District Court as to the general, systematic, and notorious undervaluation of property in Kentucky by the assessing officers for purposes of taxation, and as to the ratio of such undervaluation, the present cases are indistinguishable from the Louisville & Nashville Cases, ante, 522, and are controlled by our decision therein. Upon the point that the jurisdiction of the court extends to enjoining the collection of illegal taxes, whether assessed for state or for local pur

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poses, the present cases are controlled by the decision in the Louisville & Nashville Cases.

This disposes of all assignments of error filed by the cross-appellants (defendants below).

In these cases, as in those last mentioned, it is earnestly insisted by plaintiff that the District Court erred in holding that the Kentucky statutes, properly construed, require first an apportionment of a proper share of the total "capital stock" value to Kentucky followed by a deduction from Kentucky's proportion thereof of the value of its tangible property in the State, instead of holding that the total tangible property in and out of Kentucky should first be deducted from the total capital stock value before apportionment to the State. We need only repeat what was said in the Louisville & Nashville Cases, that this is a question of state law that has been definitely passed upon by the Kentucky Court of Appeals in Commonwealth v. Covington & Cincinnati Bridge Co., 114 Kentucky, 343, whose decision the District Court properly followed.

We come to questions peculiar to the present cases. For the year 1912 the Board of Valuation and Assessment made a preliminary assessment of the franchise at $21,500,000, of which notice was given to plaintiff, and, after a hearing, finally assessed the franchise at $14,746,857; a result reached, as already stated, by taking Kentucky "capital stock" at $27,124,240, and deducting the tangible property assessment of $12,377,383. In granting the preliminary injunction (209 Fed. Rep. 465), the court, deeming that the Board had found the fair cash value of the portion of plaintiff's capital stock in the State to be $27,124,240, equalized this with the undervaluation of other property in the State on a basis of 70 per cent. in order to arrive at a proper valuation of the franchise for the purposes of a temporary injunction. Upon the final hearing, the court reached the conclusion that the valuation of $27,124,240 was itself the result of an equaliza

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tion by the Board at 80 per cent. of what they had found to be the fair cash value of the capital stock in Kentucky; that is to say, that they had found the fair cash value to be $33,905,300. Having concluded that equalization should be made upon the basis of 60 per cent., the court applied this percentage to the $33,905,300, making the equalized capital stock value $20,343,180, deducting from which the assessed value of the tangibles $12,377,383, left $7,965,797 as the value of the franchise. Plaintiff contends that there was no sufficient evidence to support the conclusion that the Board's valuation of $27,124,240 was the result of an 80 per cent. equalization; but the contention is clearly unfounded.

There is a similar contention, equally unfounded, with respect to the mode in which the District Court applied the 60 per cent. equalization factor to the 1913 valuation.

As to the mode in which the Board arrived at a capital stock valuation for the entire system, and the mode in which the Kentucky apportionment was arrived at, several contentions are made by plaintiff besides the one of which we already have disposed. They are: (a) That when the Board capitalized earnings as an index to value they took 6 per cent. as a basis instead of 71⁄2 or 8 per cent., either of which is said to be a more proper rate upon the ground that because of annual unproductive items of expense, amounting to nearly or quite 2 per cent. of plaintiff's capitalization, the higher rate is necessary in order to yield a net 6 per cent. return upon the investment; (b) that when the stock-and-bond method was employed as an index to value the highest instead of the average market prices were employed; (c) that in capitalizing earnings gross income was used, although it included income from investments in the company's treasury, instead of net operating income, which it is insisted is the proper factor; (d) that plaintiff in each year had in its

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