Road Improvement Dist. No. 2 v. Missouri Pac. R.

SANBORN, Circuit Judge (after stating the facts as above). By its decree in this case the court below found that the special Act of the Legislature of Arkansas No. 308, approved February 23, 1920, whereby the final assessment of benefits to the property of the railroad company made by the defendant Board o £ Commissioners, on account of the construction of the highway was changed from §2,767.50 to $25,-000, was arbitrary, unconstitutional and void, and it enjoined the defendants from collecting any taxes based on that assessment or on any other assessment than the final assessment of $2,767.50 made by the Board. [1] The assignment of errors contained, six specifications, but the answer to a single question disposes of all of them, and that question is: Have the appellants clearly established by their “statement of the case” that the court below fell into an obvious error of law or made a serious mistake of fact in its finding and conclusion that the act of February 23, 1920, was arbitrary, unconstitutional, and void? This is a suit in equity, and where the chancellor, as in this case, has considered conflicting evidence, and made his finding and decree thereon, the presumption is that they are correct, and unless the appellants make it clearly appear that an obvious error of law has intervened, or a serious mistake of fact has been made in the consideration and decision of the issues in the case, the adjudication will not be disturbed. Tilghman v. Proctor, 125 U. S. 136, 8 Sup. Ct. 894, 31 L. Ed. 664; Furrer v. Ferris, 145 U. S. 132, 12 Sup. Ct. 821, 36 L. Ed. 649; Coder v. Arts, 152 Fed. 943, 946, 82 C. C. A. 91, 15 L. R. A. (N. S.) 372; In re Crocker (D. C.) 217 Fed. 167, 169; Brookheim v. Greenbaum, 225 Fed. 763, 764, 141 C. C. A. 89. [2] Rule 77 in equity provides that the statement of the case thereunder “shall be taken as superseding for the purposes of the appeal all parts of the record other than the decree,” so that in the disposition of this appeal it is unnecessary to look beyond that statement, the material contents of which have been recited. Prom that statement these indisputable and controlling facts appear: The Legislature of the state of Arkansas had delegated to the defendant, the board of commissioners, the judicial power, and had imposed upon it the judicial duty (a) 1 o make a tentative assessment of the benefits to the property of the company in this road district from the construction of the highway; (b) to give notice to that company of its making of this assessment, and of the time and place when and where flic company’s complaint of and objections to that assessment could be presented to the board for healing. Sections 20 and 21 of the act; Special Acts (Road) 1919, vol. 1, pp. 1040, 1041, and 1042. The board made the tentative assessment of §25,000, and gave the notice; the compai ty, at the time and place specified in the notice, made its objections to and complaint of this tentative — 604 — assessment; the board heard this complaint and these objections, and' finally decided and adjudged that the assessed benefits to the com- . pany’s property were $2,767.50, and caused that assessment to be entered and recorded in the proper public books of the board and the county. A few days later the Legislature of Arkansas passed the act of February 23, 1920, to the effect that such assessment which is the basis and measure of the tax against the company on account of the highway should be $25,000, more than nine times the amount of the 'final judgment and assessment of the board, instead of $2,767.50. These facts unavoidably create a strong impression that this act of the Legislature was arbitrary and unwarranted, and that it constituted a gross abuse of legislative power. The Fourteenth Amendment declares: “Nor shall any state deprive any person of life, liberty or property without due process of law.” And due process of law against one must give him notice of the charge or claim against him and an opportunity to be heard respecting the justice of the judgment, order, or action sought or to be considered. The notice must be such that he may be advised by it of the nature of the claim against him, and of the relief sought or intended, if the claim is sustained. The opportunity to be heard must be such that he may, if he chooses, cross-examine the witnesses produced to sustain the claim, and produce witnesses to refute it, if a question of fact is in issue. In re Rosser, 101 Fed. 562, 567, 41 C. C. A. 497; In re Wood & Henderson, 210 U. S. 246, 254, 28 Sup. Ct. 621, 52 L. Ed. 1046. [3] The question of fact of which the Legislature assumed jurisdiction and disposition was whether the benefits to the company’s property from the construction of the highway were $2,767.50, finally adjudged' by the board, or1 $25,000; but no such process of law as has been described had been invoked before the Legislature passed its act, which, if enforced effectively confiscates annually the difference between 7% per cent, of $2,767.50 and 7% per cent, of $25,000, or $1,667.44 of its property. The power is conferred and the duty is imposed upon a federal court sitting in equity to relieve by its decree, injunction, or other process a citizen of the United States who properly invokes its aid from an arbitrary and unwarranted exercise of the legislative power of a state, which without due process of law or compensation threatens to deprive it of all or a part of its property. Kansas City Southern Ry. Co. v. Road Improvement District No. 6 of Little River County, 256 U. S. -, 41 Sup. Ct. 604, 65 L. Ed. -, (opinion filed June 6, 1921); Gast Realty & Investment Co. v. Schneider Granite Co., 240 U. S. 55, 58, 59, 36 Sup. Ct. 254, 60 L. Ed. 523; Royster Guano Co. v. Virginia, 253 U. S. 412, 415, 416, 40 Sup. Ct. 560, 64 L. Ed. 989; Coe v. Armour Fertilizer Works, 237 U. S. 414, 423-426, 35 Sup. Ct. 625, 59 L. Ed. 1027; Hancock v. City of Muskogee, 250 U. S. 454, 39 Sup. Ct. 528, 63 L. Ed. 1081. In support of the constitutionality of this legislative act counsel for the defendants first argue that the first assessment of $25,000 made by the board was valid, and call attention to statements in the statement of the case to the effect that the board, in making that assessment and — 605 — the other assessments of benefits to the property of other owners arising from the construction of the highway, considered proper elements and conditions, but that assessment was not a final, but a mere tentative, assessment, subject under the statutes of the state to the complaint, and objections ox the company, lo a judicial hearing of such complaint and objections by the board, and if they were overruled, or the relief sought thereby was denied, to a suit and adjudication of the questions presented in the chancery court of the state of Arkansas. Section 21, supra. The company presented, and the board heard, its objections to and complaint of this $25,000 assessment, and as a result of such hearing the board set that assessment aside, and finally assessed and adjudged the benefits of the company’s properly to be $2,767.50, and thenceforth its tentative assessment of $25,000 was without force or effect. Moreover, the deposition of Mr. Strait is as much a pari, of the “statement of the case” as are the statements therein about the board’s $25,000 assessment; and while the statement of the case clearly shows that there was much evidence before the court below which that statement does not contain, it does contain the deposition of Mr. Strait, and no testimony of any one of the commissioners or-of any other witness which contradicts the statements of Mr. Strait in that deposition that before the hoard made its $25,000 assessment he discussed the amount of the benefits with some of the members of the hoard, that one of them thought it should be about $3,750, but that this amount was perhaps too low, and after discussion they tentatively agreed with him that it should he $2,500, that the assessment they finally made, $2,767.50, after hearing his objections to the board’s $2,500 assessment, was at the rate of $125 per mile of the road in the district, that this was the rate at which the assessment of benefits to the property of the company in the adjoining county of Pope was made, that $85 per mile was the rate on which the assessment in Johnson county was based, that when he learned of the hoard’s $25,000 assessment he was informed that it was not intended that this assessment should stand, that the hoard would take the matter up with the company and treat it right after some other assessments were adjusted, that they did take it up thereafter, and hear the company’s objections and complaint, and after the hearing and discussion finally adjudged the assessment of $2,767.50, that there were no special benefits to the property of the railroad from the construction of this parallel highway, and that “so far as I know, and as war, ever discussed with me, no one ever claimed or maintained originally that anything like benefits in the sum of $25,000 would accrue to the railroad by reason of the construction of this parallel road.” Repealed readings of the statement of the case and deliberate consideration thereof have convinced that neither the tentative $25,000 assessment made by the board nor anything in the statement of the case estopped the company from insisting, or the court below from finding, that the benefits to the property of the company did not exceed $2,767.50, and that, on the other hand, there was ample evidence in that statement of the case to sustain such a finding, and that there is little doubt that the court below did so find, and on that finding based its decision and decree. — 606 — The next contention of counsel for the defendant is that the agreement to reduce the assessment to $2,767.50 was unlawful, because it destroyed the equality and uniformity of the assessment of benefits throughout the district. Conceding that the law requires equality and uniformity in the assessments, in the sense of an absence of unreasonable discrimination between members of classes and between classes of owners and of property, the statement of the case fails to satisfy that the change of the board’s tentative assessment of $25,000 to $2,767.50 after the hearing of the complaint and objections of the company had any such effect or was illegal. If, as the statement of the case tends to prove, the benefits to the company’s property did not exceed $2,767.-50, it was the right of the company to have the tentative assessment reduced to that amount, and the duty of the board so to reduce it. If it had not done so, the company would have had the right to bring a suit in the chancery court of the state, and there to acquire a decree for such a reduction. In the face of these statutory and legal rights of the company, the suggestion that such a reduction might produce a discrimination that is not proved, and the facts that the board probably could have prevented or removed, and perhaps did prevent or remove, such discrimination by changing other assessments, or in some other lawful way, when it made the reduction, this objection of possible discrimination may not prevail. Another contention of counsel is that the final assessment of $2,767.-50 was illegal, because the board reduced the assessment from $25,000 to $2,767.50 pursuant to an agreement, that it made the reduction in consideration of a representation and agreement of the attorney and engineer of the company that they would use their influence with it to induce it to put in some switches and side tracks for the board free of cost; but the statement of the case convinces that neither the attorney nor the engineer had any authority to bind the company to put in such switches and side tracks, that they notified the board and its members knew that fact before it made the reduction, that when the board called for the switches and spurs the attorney and engineer did use their influence with the company to obtain them for the board, but the operation and control of the railroad were then in the government, and higher officials refused to furnish them. ■ Counsel argue the illegality of the board’s final assessment as though the fact were established that the value of the benefits was $25,000. On that assumption they write that in making the final assessment the board put only $2,767.50 of this $25,000 on the assessment books, and gave to the company the benefit of $22,232.50 of the $25,000 benefits for the promise of the attorney and the engineer; but this argument is not persuasive, because the assumption is not sustained by the statement of the case, which, in the opinion of the court, warrants the conclusion, probably reached by the court below, that the benefits did not exceed. $2,767.50. As the company made no agreement about the switches and spurs, as the statement of the case warrants the conclusion that the benefits to it did not exceed $2,767.50, the fact that the board reduced the tentative assessment to that amount after the hearing in the hope that the attorney and engineer would be able to induce the — 607 — company to put in the switches and side tracks free of charge, presents no sound or persuasive reason, either at law or in equity, why the company should not be relieved by a court of equity from the arbitrary and unwarranted increase of that assessment to $25,000 by legislative fiat without due process of law. The last contention is that the act of the Legislature challenged is in itself constitutional and valid, but none of the authorities cited sustain a statute analogous to this act. Counsel cite Spencer v. Merchant, 125 U. S. 345, 356, 357, 8 Sup. Ct. 921, 31 L. Ed. 763. In that case an assessment was made on property for street improvements without notice to the owners and an opportunity for them to be heard. Some of the owners paid, others refused to pay, and the court held their assessments void for want, of notice and hearing. Thereupon the Legislature passed an act to the effect that the part of the assessments for the improvements unpaid might be assessed proportionately on the property of the owners who had failed to pay, provided that notice was given to them and an opportunity afforded for them to be heard. This act was sustained by the court, but in that case the statute expressly provided for notice to the owners of the hearing and for an opportunity for them to be heard before the assessments against them should be made. The act in hand provided neither notice nor hearing. [4] They cite decisions of the Supreme Court of Arkansas to the effect that the Legislature has the power in the first instance to levy assessments on property in improvement districts, “subject to the right of the landowners to have an arbitrary abuse of that power reviewed by tire courts,” and that it can therefore adopt as correct the assessment made by the commission as a reassessment by the Legislature. Gibson v. Spikes et al., 143 Ark. 270, 220 S. W. 56, 57; Coffman v. St. Francis Drainage District, 83 Ark. 54, 103 S. W. 179; Davies v. Checo Drainage District, 112 Ark. 357, 166 S. W. 170. But in the case in hand the Legislature did not undertake itself to make the assessment on the property in this district, hut it delegated that power to and imposed that duty upon the board of the district. And when the Legislature delegates to a board or to commissioners the determination of the question what lands will be benefited, or what the amount of benefits to such lands will he, the inquiry becomes in its nature judicial, in such a sense that property owners are entitled to a hearing, or an opportunity to be heard, after notice, before these questions are determined. Fallbrook Irrigation District v. Bradley, 164 U. S. 112, 174, 175, 17 Sup. Ct. 56, 41 L. Ed. 369; Embree v. Kansas City Road District, 240 U. S. 242, 247, 36 Sup. Ct. 317, 60 L. Ed. 624. Nor did the act in question adopt an existing- assessment by the board. On the other hand, it arbitrarily substituted an assessment: of $25,000 against one only of many property owners for the final assessment and judgment of $2,767.50 which the board had made after notice to the owner of the property and a hearing in the ordinary course of its judicial proceeding, and under the established rules of law and equity no rational way of escape is perceived in this state of the case from the finding and decision of the court below that this substitution was arbitrary, unconstitutional, and void. — 608 — Finally, counsel contend that the court erred in restoring the final assessment of $2,767.50 made by the board. But that assessment was never removed, nor was it restored. The decision of the court below, which this court sustains, is that the act of the Legislature in question was void, the assessment of $2,767.50 was and ever after it was made, has been in equity and right in full force and effect, and the same conclusions and reasons which have led to the affirmance of that finding and decision sustain the portion of the decree here questioned, which is to the effect that the assessment of $2,767.50 is the only valid assessment, and that the injunction against the collection of the taxes on the basis of the assessment of $25,000 shall not prevent the collection of the taxes on the basis of the assessment of $2,767.50. It does not appear to this court that the court below fell into any error of law or mistake of fact in its finding or decree in this case, and it is therefore affirmed.