Raymondv v. Chicago Union Traction Co.

Background

A Chicago streetcar company challenged an assessment by the State board of equalization, saying the board used a different method for valuing its franchises than for other similar corporations. That different method produced an enormous disparity: a warrant demanded $1,019,211.78, while the circuit judge found a fair amount to be $134,350.03, which the company paid under the court’s direction. The company sued to stop collection of the remaining tax and argued the board’s action violated the Fourteenth Amendment’s protections against being deprived of property without due process and against unequal treatment under the law.

Reasoning

The Court explained the state board of equalization acts as an instrument of the State, so its actions can be treated as state action under the Fourteenth Amendment. Because the board adopted and applied a different valuation method to a large class of corporations, the result was an illegal and systematic discrimination. The Court held equity courts may intervene when a valuation system is applied unequally and to many companies. At the same time, equity will not block tax collection without requiring the taxpayer to pay the amount fairly due; here the circuit court conditioned relief on payment of the fair tax amount, which the company paid.

Real world impact

This ruling lets federal courts review and block collection of state tax assessments when a state agency’s assessment method causes systemic discrimination against corporations. It protects large taxpayers from unequal valuation, but relief typically requires payment of a fair tax amount first. The judgment affirming the injunction was sustained.

Dissents or concurrances

Justice Holmes (joined by Justice Moody) dissented, arguing the federal court should not have taken jurisdiction until state remedies were exhausted and the state’s highest court had an opportunity to rule on the board’s actions.