APPEALS FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF OHIO
White, McKenna, Holmes, Hughes, Van Devanter, Lamar, Pitney; Day took no part in the decision.
MR. JUSTICE PITNEY, after making the foregoing statement, delivered the opinion of the court.
These two cases depend upon practically identical facts, and present the same questions of law.
The Federal jurisdiction arose because of the Federal questions presented in the record, and did not depend upon diversity of citizenship; and it extends of course to
the determination of all the questions presented, irrespective of the disposition that may be made of the Federal questions. Siler v. Louisville & Nashville R. Co., 213 U.S. 175, 191; Michigan Central R. Co. v. Vreeland, 227 U.S. 59, 63.
The right to invoke the equity jurisdiction is clear; for the Act specifically makes the tax a lien upon the real estate of appellants, from the cloud of which they sought to free it by the bringing of these actions (§ 117 of Act; § 5506, Gen. Code); and the bills alleged threatened irreparable injury through the enforcement of the penalties and coercive features of the Act. Shelton v. Platt, 139 U.S. 591, 598; Ex parte Young, 209 U.S. 123.
The following are the questions to be disposed of:
First, it is insisted by appellants that under the state constitution, as construed by the Ohio Supreme Court in Southern Gum Co. v. Laylin, 66 Oh. St. 578, the legislature is without power to impose a privilege tax which is in excess of the value of the privilege; that the admitted facts show the present tax upon appellants respectively to be in excess of such value; and that therefore as to them its exaction violates the state constitution, and amounts to confiscation, and a taking of property without due process of law.
As to the facts upon which this contention is based, the bill of complaint of the Marietta, Columbus & Cleveland Railroad Company shows that the tax charged against it for the year 1911 amounts to $2,301.24; that the capital of the company is all, or practically all, invested in its railroad; that this investment was and is a reasonable and proper one; that due care and prudence have been used in the construction, maintenance and operation of the property and the conduct of the business; that the greatest economy has been and is being practiced in the effort to make the railroad yield a fair return upon the investment; but that notwithstanding these efforts it has
never been able to earn, and is not now able to earn, from interstate or intrastate business, or both combined, after paying necessary and proper expenses, including taxes other than the excise tax, a return on the investment in its railroad, or on the value thereof, equal to the current rate of return on legitimate high-grade investments at all times readily available in the market; nor have its intrastate earnings, after deducting operating expenses properly attributable thereto, been sufficient to yield a return on that portion of its investment properly attributable to intrastate operations, equal to the current rate of return on legitimate high-grade investments; that, on the contrary, the gross ...