Henrietta Mills v. Rutherford County, NC

Decision Date02 May 1929
Docket NumberNo. 2803.,2803.
Citation32 F.2d 570
PartiesHENRIETTA MILLS v. RUTHERFORD COUNTY, N. C., et al.
CourtU.S. Court of Appeals — Fourth Circuit

Willis Smith and W. T. Joyner, both of Raleigh, N. C. (H. M. Stephens, of Los Angeles, Cal., on the brief), for appellant.

Clyde R. Hoey, of Shelby, N. C., and Fred D. Hamrick, of Rutherford, N. C. (Quinn, Hamrick & Harris, of Rutherford, N. C., and C. O. Ridings, of Forest City, N. C., on the brief), for appellees.

Before WADDILL, Circuit Judge, and McDOWELL and SOPER, District Judges.

SOPER, District Judge.

The Henrietta Mills, a corporation of North Carolina, filed a bill of complaint in the District Court of the United States for the Western District of North Carolina, to enjoin and restrain Rutherford county, in that state, and its sheriff, from collecting from the corporation, or enforcing against its property, any claim for taxes for the year 1927, or any subsequent year, based upon an assessment of the property which tax officials of the county had made. The basis for federal jurisdiction is the claim that, unless injunctive relief is granted as prayed, the corporation will be deprived of its property without due process of law, and be denied the equal protection of the laws by the state of North Carolina, in contravention of the Fourteenth Amendment of the Constitution of the United States.

The Constitution of North Carolina (article 5, § 3) provides that laws shall be passed taxing by uniform rule all real and personal property, according to its true value in money. Article 7, § 9, provides that all taxes levied by any county, city or town, shall be uniform and ad valorem upon all property in the same, except property exempted. Section 7971 (46) of the Code of 1927 of North Carolina provides that it is the purpose of the tax laws of the state to have all property assessed at its true and actual value in money — that is, what the property would bring at cash sale when sold in the usual manner.

The bill of complaint charges that the actual value in this sense of the corporation's property in Rutherford county, North Carolina, on May 1, 1927, did not exceed $1,887,352; but it was actually assessed by officials of the county in 1927 at $2,637,819, in violation of the Constitution and statutes of the state. The corporation therefore filed a complaint under the provisions of section 7971 (89) of the North Carolina Code against the assessment with the county commissioners as a board of equalization and review, objecting to the overvaluation of the property, but the board declined and refused to hear and pass upon the questions presented by the complaint. Thereupon the corporation took an appeal under the provisions of section 7971 (90) to the state board of assessment, which, after hearing, deducted the sum of $275,000 from the valuation of the assessors, and fixed the value of the corporation's property at $2,362,819.

The complainant charges that the tax officials of the county, and of the state, have intentionally, systematically, and arbitrarily fixed the value of the complainant's property greatly in excess of its true value, and at the same time have arbitrarily, intentionally, and systematically fixed the assessment value of practically all other assessable property in Rutherford county, at only 60 per cent. of its true value; that the assessment on complainant's property should be reduced to 60 per cent. of its true value, that is to say, to the sum of $1,132,411.20; and that any assessment for the year 1927 or subsequent years in excess of said sum is an arbitrary, intentional, and systematic taking of its property contrary to the provisions of the federal Constitution. The complainant paid to Rutherford county, through the sheriff, the sum of $26,894.77, which is equal to the tax fixed by the officials of the said county upon a valuation of $1,132,411.20, without prejudice to its claim that said payment should constitute full payment for all taxes due by it to the county.

The answer of the defendant denies that there has been an arbitrary and intentional overvaluation of the complainant's property, or an unlawful discrimination in the assessment of that property in comparison with other property in the county and state, and asserts that, if the complainant was aggrieved by the decision of the tax officials, it had an adequate remedy at law under section 7979 of the North Carolina Code, and hence the United States District Court was without jurisdiction of the equitable action.

Affidavits in support of the bill were offered by the complainant, and counter affidavits by the respondents. The District Court found as a conclusion of fact upon these affidavits that there was no unlawful or unjust discrimination by the tax officials in determining the value of the complainant's property, and, being of the opinion that in any event the complainant had an adequate remedy at law under the statutes of North Carolina, not merely refused the injunction, but also dismissed the bill of complaint. From this decree an appeal was taken. The important question before the court, therefore, is whether the bill of complaint states a cause of action which entitles the complainant to proceed in the federal court in equity.

The bill of complaint does make out a case within the jurisdiction of the federal court, for it states a substantial controversy under the Fourteenth Amendment to the Constitution of the United States. If the allegations are true, the complainant has been denied the equal protection of the laws by the tax officials of Rutherford county, whose action in this respect must be considered to be the action of the state. Raymond v. Chicago, etc., Co., 207 U. S. 20, 28 S. Ct. 7, 52 L. Ed. 78, 12 Ann. Cas. 757; Greene v. Louisville, etc., Co., 244 U. S. 499, 37 S. Ct. 673, 61 L. Ed. 1280, Ann. Cas. 1917E, 88; Johnson v. Wells Fargo & Co., 239 U. S. 234, 36 S. Ct. 62, 60 L. Ed. 243. Furthermore, it is well settled that a federal court of equity may properly interfere to restrain the violation of a taxpayer's rights by an unconstitutional exercise of the taxing powers, unless there be a plain, adequate, and complete remedy at law available to the taxpayer in the federal court. Cummings v. Merchants' National Bank of Toledo, 101 U. S. 153, 157 (25 L. Ed. 903); Raymond v. Chicago, etc., Co., 207 U. S. 20, 28 S. Ct. 7, 52 L. Ed. 78, 12 Ann. Cas. 757; Southern Ry. Co. v. Query (D. C.) 21 F.(2d) 333; Chicago, B. & Q. R. Co. v. Osborne, 265 U. S. 14, 44 S. Ct. 431, 68 L. Ed. 878; Risty v. Chicago, R. I. & P. R. Co., 270 U. S. 378, 388, 46 S. Ct. 236 (70 L. Ed. 641); Bohler v. Callaway, 267 U. S. 479, 45 S. Ct. 431, 69 L. Ed. 745.

The decisions of the Supreme Court indicate a proper reluctance to interfere by intervention with the fiscal operations of the state governments, and the federal courts have refrained from doing so when the federal rights of persons could be otherwise preserved. So it has been held that, if a statute of the offending state imposes upon the state officials the duty to refund taxes illegally collected, and confers upon the taxpayer a right to enforce that duty by an action at law, the remedy is adequate, and a suit in equity to enjoin the collection of the tax will not lie. Boise Artesian Water Co. v. Boise City, 213 U. S. 276, 29 S. Ct. 426, 53 L. Ed. 796; Singer Sewing Machine Co. v. Benedict, 229 U. S. 481, 33 S. Ct. 942, 57 L. Ed. 1288; Keokuk Bridge Co. v. Salm, 258 U. S. 122, 42 S. Ct. 207, 66 L. Ed. 496.

North Carolina has enacted such a statute. See Consolidated Statutes of North Carolina, § 7979, which provides as follows:

"Unless a tax or assessment, or some part thereof, be illegal or invalid, or be levied or assessed for an illegal or unauthorized purpose, no injunction shall be granted by any court or judge to restrain the collection thereof in whole or in part, nor to restrain the sale of any property for the nonpayment thereof; nor shall any court issue any order in claim and delivery proceedings or otherwise for the taking of any personalty levied on by the sheriff to enforce payment of such tax or assessment against the owner thereof. Whenever any person shall claim to have a valid defense to the enforcement of a tax or assessment charged or assessed upon his property or poll, such person shall pay such tax or assessment to the sheriff; but if, at the time of such payment, he shall notify the sheriff in writing that he pays the same under protest, such payment shall be without prejudice to any defenses or rights he may have in the premises, and he may, at any time within thirty days after such payment, demand the same in writing from the treasurer of the state or of the county, city, or town, for the benefit or under the authority or by request of which the same was levied; and if the same shall not be refunded within ninety days thereafter, may sue such county, city, or town for the amount so demanded, including in his action against the county both state and county tax; and if upon the trial it shall be determined that such tax or any part thereof was levied or assessed for an illegal or unauthorized purpose, or was for any reason invalid or excessive, judgment shall be rendered therefor, with interest, and the same shall be collected as in other cases. The amount of state taxes for which judgment shall be rendered in such action shall be refunded by the state treasurer."

It is obvious that the remedy by an action at law to recover a tax illegally exacted, which this statute affords, is as full and complete as those which, in the cases cited, were held to forbid access to the equity court. Moreover, the remedy is one which in the instant case may be pursued in the federal court, because, although there is no diversity of citizenship, the matter in controversy arises under the Constitution of the United States. Keokuk Bridge Co. v. Salm, 258 U. S. 122, 42 S. Ct. 207, 66 L. Ed. 496; Greene v. Louisville, etc., Co., 244 U....

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