Johnson v. Wells Fargo & Co., 239 U.S. 234 (1915)

Johnson v. Wells Fargo & Company

No. 277, 278

Argued October 12, 13, 1915
Decided November 29, 1915
239 U.S. 234

APPEALS FROM THE CIRCUIT COURT OF APPEAL

FOR THE EIGHTH CIRCUIT

Syllabus

A requirement of a state constitution that all taxes shall be levied and assessed upon property of corporations as near as may be by the same methods as are provided for taxing property of individuals is violated by giving controlling effect in the valuation of property of a corporation to the gross income derived therefrom, when the property of individuals is assessed for what it is really worth without giving controlling effect to the gross income derived therefrom.

Although a taxing statute, upon its face, may be unobjectionable, its administration may, by the adoption of unequal methods of valuation, be illegal.

Taxes imposed by the State of South Dakota on express companies based on their gross earnings in the state held to be in violation of the provision of the constitution of that state requiring property of corporations to be taxed as nearly as may be as property of individual.

In a case in which the constitutionality of a method of taxation under a state law is questioned, the federal court is not bound by the decision of the state court in upholding that method if its constitutionality under the state constitution was not questioned in the case in which such decision was made.

A valuation for assessment so unwarranted by the law and a method of making the assessment, amounting either to a fraud or such gross mistake as to amount to fraud upon the constitutional rights of the person taxed, are grounds of equity for enjoining the enforcement of the tax. Singer Sewing Machine Co. v. Benedict, 229 U.S. 481, distinguished.

After the collection of a tax has been enjoined on the ground that the assessment was unwarranted and violated constitutional rights and no appeal was taken from the decree, the imposition of a tax for the following year based on a similar assessment amounts to such a continuing violation of constitutional rights as might, in itself, afford ground for equitable relief.

214 F. 180 affirmed.

The facts, which involve the constitutionality of tax assessments on property of express companies in South Dakota, are stated in the opinion.