200 U.S. 273 (1906), 88, Gunter v. Atlantic Coast Line Railroad Company

Docket NºNo. 88
Citation200 U.S. 273, 26 S.Ct. 252, 50 L.Ed. 477
Party NameGunter v. Atlantic Coast Line Railroad Company
Case DateJanuary 15, 1906
CourtUnited States Supreme Court

Page 273

200 U.S. 273 (1906)

26 S.Ct. 252, 50 L.Ed. 477

Gunter

v.

Atlantic Coast Line Railroad Company

No. 88

United States Supreme Court

January 15, 1906

Argued December 1, 4, 1905

APPEAL FROM THE CIRCUIT COURT OF THE UNITED

STATES FOR THE DISTRICT OF SOUTH CAROLINA

Syllabus

A suit against state officers to enjoin them from enforcing a tax alleged to be in violation of the Constitution of the United States is not a suit against a state within the prohibition of the Eleventh Amendment.

While a state may not, without its consent, be sued in a circuit court of the United States, such immunity may be waived, and if it voluntarily becomes a party to a cause and submits its rights for judicial determination, it will be bound thereby.

An appearance "for and on behalf of the state" by the Attorney General, pursuant to statutory provisions, in an action brought against county officers but affecting state revenues, in this case amounted to a waiver by the its immunity from .suit, and such immunity could not be invoked in an ancillary suit subsequently brought against the successors of the original defendants to enforce the decree.

A decree of the circuit court of the United States having jurisdiction of the cause and in which the state appeared that a charter exemption existed in favor of a railroad company by virtue of a contract within the meaning of the impairment of obligation clause of the federal Constitution is binding upon the state as to the existence and effect of the contract during the period of exemption, and the rule that a decree enjoining the collection of a tax is not res judicata as to the right to collect for a subsequent year does not apply.

Neither the Eleventh Amendment nor § 720 Rev.Stat. controls a court of

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the United States in administering relief where it is action in a matter ancillary to a decree rendered in a cause over which it had jurisdiction; nor is a circuit court debarred from enforcing its decree by ancillary suit in equity restraining improper prosecutions of actions in the state courts because there is an adequate remedy at law by interposing defense in those actions. The rule that the collection of a tax should not be enjoined unless the amount admitted to be due is tendered does not apply where the amount due is for a period not covered by the injunction or affected by the decree.

The facts are stated in the opinion.

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WHITE, J., lead opinion

MR. JUSTICE WHITE delivered the opinion of the Court.

Before analyzing the facts particularly bearing upon the legal questions for decision, in order to a comprehension of those questions, we summarize, in their chronological order, matters which are undisputed concerning the origin and development of this controversy.

The Legislature of South Carolina, in 1855, exempted the capital stock and property of the Northeastern Railroad Company from all taxation during its charter existence. In 1849, the Cheraw & Darlington Railroad Company was chartered by legislative act, and, by an amendment to the charter, adopted in 1863, the last-named company was endowed with all the powers, rights, and privileges granted by the charter of the Northeastern Railroad Company, it being besides provided that the charter should not be subject to the provisions of a general law reserving the right to repeal, alter, and amend except where otherwise specially provided.

Under the assumed authority of a law of South Carolina providing for the assessment and taxation of property, passed in 1868 (14 S.C.Stat. 27-69), the Cheraw & Darlington Railroad was assessed in the Counties of Darlington and Chesterfield, through which the road ran. It became the duty of

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the respective treasurers of the counties named to collect the state and county taxes on the assessment thus made, and they proceeded so to do. Thereupon, in 1870, Thomas E. B. Pegues, a citizen of Mississippi, a stockholder of the Cheraw & Darlington Railroad, filed his bill in the Circuit Court of the United States for the District of South Carolina against the Cheraw & Darlington Railroad Company and the Treasurers of Darlington and Chesterfield Counties, seeking to enjoin the corporation from paying, and the county treasurers from collecting, the taxes referred to. The ground stated for the relief prayed was that the taxes in question impaired the obligation of the charter contract of exemption, and were therefore repugnant to the Constitution of the United States. Various provisions of a law of South Carolina, adopted in 1870 as an amendment to the act of 1868 under which the taxes were levied, restricting the right of the corporation to resist the collection of taxes or to recover back an illegal tax, if paid, were alleged as justifying the interposition of a court of equity. An injunction pendente lite was allowed restraining the collection of the disputed taxes. By its answer, the corporation admitted the averments of the bill. A joint answer was filed for the two county treasurers, signed by "The Attorney General for the South Carolina, for defendants." This answer admitted the assessment, the steps taken to collect the taxes, and asserted their validity, and denied the existence of the alleged contract of exemption. It was averred that if such an exemption ever existed, it was subject to the legislative power to repeal, alter, and amend, and such repeal was alleged to have been operated by constitutional and legislative provisions, which were referred to. Jurisdiction of the court in equity was challenged on the ground that there was an adequate remedy at law. A final decree passed in favor of [26 S.Ct. 254] the complainant, recognizing the alleged exemption and perpetuating the injunction. An appeal was prosecuted to this Court. The cause was decided at the December term, 1872. It was held that there was a contract of exemption, which would be impaired by enforcing the taxes

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complained of, and hence the decree below was affirmed. Humphrey v. Pegues, 16 Wall. 244.

For at least twenty-five years following the decision in the Pegues case, no attempt was made to tax the property of the Cheraw & Darlington Railroad Company. In the year 1897, an act was passed directing the Attorney General to proceed to test the right of any railroad company to exemption, and, under this act, that official sued the Cheraw & Darlington Railroad Company to recover $134,000, the sum of taxes, penalties, and interest for a period of twenty years on the alleged ground that the company had been mistakenly treated as having a contract of exemption. The supreme court of the state, however, without passing upon the question of exemption, decided that the right to recover did not obtain because, in any event, an assessment against the railroad, as provided by law, was a prerequisite to the levy and collection of taxes.

From a statement made in the argument of counsel it is to be deduced that, during the year 1898 the capital stock and property of the Cheraw & Darlington Railroad Company was acquired by the Atlantic Coast Line Railroad Company of South Carolina, and, as the result of a charter granted to that company by the State of South Carolina, in 1898, it is conceded that the property formerly belonging to the Cheraw & Darlington Railroad Company became taxable, and that the state has, since that time, levied and collected the taxes due on the property. It is, moreover, conceded that the appellee on this record, the Atlantic Coast Line Railroad Company, a Virginia corporation, acquired in 1900 the property of the Cheraw & Darlington Railroad Company, as the successor of the South Carolina corporation which bore the same name.

In the year 1900, an act was passed in South Carolina providing for the assessment for taxation of railroad property

which has been off the tax books for the years in which they have been off the books, and to fix the time when such taxes shall become due, and for the collection thereof.

The act

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created a board to make the assessment to which it referred, limited the taxes to be imposed to ten years back, provided that the assessment made by the board should be put upon the rolls separately for each of the back years, and that there should be levied upon such assessment state and county taxes for the years to which the back assessment related. The act caused the taxes for which it provided to become a lien against the property upon which they might bear, and directed a certification of the taxes as assessed and levied to the respective county treasurers, and made it their duty to collect the same. To this end, such treasurers were directed to make a demand for payment upon the company in whose name the assessment was made, or, if it was found that the property assessed was "in the control of another company, demand should be made of the company . . . in possession of the property." By the act, in addition, the Attorney General was directed, if the back taxes assessed were not paid within sixty days after demand, to bring a suit in the name of the state, with the cooperation of such counsel as the counties might employ, to enforce the collection of the back taxes against the company in whose name they were assessed, or against the company found in possession of the property assessed.

A meeting of the board appointed by this act was called in May, 1900, by the Secretary of State for the purpose of assessing the property formerly belonging to the Cheraw & Darlington Railroad Company, and in the control and possession of the Atlantic Coast Line Railroad, for a period of ten years back from 1898, on the ground that, during such period, the property in question had not been taxed for state or county purposes. The Atlantic Coast Line Railroad Company appeared and protested against the proposed assessment. In the protest, it directed the attention of the board to the exemption act, to the...

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