Hillsborough Tp Somerset County v. Cromwell

• Decision Date: 28 January 1946
• Docket Number: No. 305,305
• Citation: 326 U.S. 620,90 L.Ed. 358,66 S.Ct. 445
• Parties: HILLSBOROUGH TP., SOMERSET COUNTY, N.J., et al. v. CROMWELL
• Court: U.S. Supreme Court

326 U.S. 620

66 S.Ct. 445

90 L.Ed. 358

HILLSBOROUGH TP., SOMERSET COUNTY, N.J., et al.

v CROMWELL.

No. 305.

Argued Dec. 13, 14, 1945.

Decided Jan. 28, 1946.

Mr. Harry E. Walburg, of Newark, N.J., for petitioners.

Messrs. Charles E. Hughes, Jr., of New York City, and Shelton Pitney, of Newark, N.J., for respondent.

Mr. Justice DOUGLAS delivered the opinion of the Court.

This action was brought by respondent under the Declaratory Judgment Act, Judicial Code, § 274d, 28 U.S.C. § 400, 28 U.S.C.A. § 400, to have declared null and void certain assessments on intangible personal property entered for the years 1940 and 1941 by the Collector of Hillsborough Township, Somerset County, New Jersey.¹ The jurisdiction of the federal court in New Jersey was invoked by reason of diversity of citizenship and the allegation that the taxing authorities had consistently, systematically and intentionally singled out respondent for discriminatory treatment in the assessment of taxes for which she was without remedy under the laws and decisions of New Jersey. It was prayed that the assessments be declared invalid as in contravention of the due process and equal protection clauses of the Fourteenth Amendment and of the provisions of applicable New Jersey statutes to which we will later refer. The District Court denied a motion to dismiss the gave judgment for respondent. 56 F.Supp. 41. The Circuit Court of Appeals, 3 Cir., affirmed. 149 F.2d 617. The case is here on a petition for a writ of certiorari which we granted because the asserted conflict of that decision with Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 63 S.Ct. 1070, 87 L.Ed. 1407, raised an important problem concerning the relationship between the federal courts and state taxing authorities.

Sec. 267 of the Judicial Code, 28 U.S.C. § 384, 28 U.S.C.A. § 384, provides that suits in equity shall not be sustained in the federal courts 'in any case where a plain, adequate, and complete remedy may be had at law.' That principle has long been recognized as having 'peculiar force' in cases where the federal courts were asked to enjoin the collection of a state tax. Matthews v. Rodgers, 284 U.S. 521, 525, 52 S.Ct. 217, 219, 76 L.Ed. 447, and cases cited. 'The scrupulous regard for the rightful independence of state governments which should at all times actuate the federal courts, and a proper reluctance to interfere by injunction with their fiscal operations, require that such relief should be denied in every case where the asserted federal right may be preserved without it.' Id., 284 U.S. page 525, 52 S.Ct. page 219. Where the remedy at law is 'plain, adequate, and complete', it is the one which must be pursued even for the protection of any federal right. That practice of the federal equity courts was given further recognition and sanc- tion by Congress in the Johnson Act, 48 Stat. 775, as amended, 50 Stat. 738, § 24(1) of the Judicial Code, 28 U.S.C. § 41(1), 28 U.S.C.A. § 41(1), which provides that 'no district court shall have jurisdiction of any suit to enjoin, suspend, or restrain the assessment, levy, or collection of any tax imposed by or pursuant to the laws of any State where a plain, speedy, and efficient remedy may be had at law or in equity in the courts of such State.' It was against that background that we held in Great Lakes Dredge & Dock Co. v. Huffman, supra, that the policy which led federal courts of equity to refrain from enjoining the collection of allegedly unlawful state taxes should likewise govern the exercise of their discretion in withholding relief under the Declaratory Judgments Act.

The Circuit Court of Appeals fully recognized the principle of the Huffman case, but concluded that the state procedure was not 'speedy, efficient or adequate' (149 F.2d 620) to protect the federal right against discriminatory state taxation. It is around that conclusion that the first phase of this controversy turns.

The equal protection clause of the Fourteenth Amendment protects the individual from state action which sel cts him out for discriminatory treatment by subjecting him to taxes not imposed on others of the same class. The right is the right to equal treatment. He may not complain if equality is achieved by increasing the same taxes of other members of the class to the level of his own. The constitutional requirement, however, is not satisfied if a State does not itself remove the discrimination, but imposes on him against whom the discrimination has been directed the burden of seeking an upward revision of the taxes of other members of the class. Sioux City Bridge Co. v. Dakota County, 260 U.S. 441, 445-447, 43 S.Ct. 190, 191, 192, 67 L.Ed. 340, 28 A.L.R. 979; Iowa-Des Moines Nat'l Bank v. Bennett, 284 U.S. 239, 247, 52 S.Ct. 133, 136, 76 L.Ed. 265; Cumberland Local Co. v. Board of Revision, 284 U.S. 23 28, 29, 52 S.Ct. 48, 50, 76 L.Ed. 146. The courts of New Jersey in a long line of decisions² have held that a taxpayer who has been singled out for discriminatory taxation may not obtain equalization by reduction of his own assessment. His remedy is restricted to proceedings against other members of his class for the purpose of having their taxes increased. The rule was stated in Royal Mfg. Co. v. Board of Equalization, 76 N.J.L. 402, 70 A. 978, affirmed 78 N.J.L. 337, 74 A. 525, as follows: '* * * the county boards are required to secure taxation of all property at its true value; so that the fact that the property of A. is assessed at its true value, and the property of other taxpayers within the same district is assessed below its true value, affords A. no ground for demanding a reduction of his valuation, though it does entitle him to apply for an increase in the valuation of the others.' 76 N.J.L. pages 404, 405, 70 A. page 979. On the basis of that rule it is plain that the state remedy is not adequate to protect respondent's rights under the federal Constitution.

It is argued, however, that in 1933 the New Jersey courts adopted a different rule when Central R. Co. v. Thayer-Martin (State Tax Department), 112 N.J.L. 5, 169 A. 489, was decided by the Court of Errors and Appeals. In that case the court did entertain an objection that the particular tax assessment violated the rule of Sioux City Bridge Co. v. Dakota County, supra. It found that the complaining taxpayer had not shown that a discrimination within the meaning of our cases existed. So it is argued that as the highest court in New Jersey recognized the federal rule, the federal District Court should have remitted respondent to her remedy in the New Jersey courts. There is, however, a two-fold difficulty with that position.

In the first place, the same judge who wrote the opinion for the Court of Errors and Appeals in the Thayer-Martin case wrote the opinion for the Supreme Court of New Jersey a year later in Lehigh Valley R. Co. v. State Board, 174 A. 359, 12 N.J.Misc. 673. The taxpayer contended that the state board of tax appeals erred in refusing to admit evidence of discrimination. The argument was that the rule of Sioux City Bridge Co. v. Dakota County, supra, should be followed and the holding of Royal Mfg. Co. v. Board of Equalization, supra, should be disapproved. The Supreme Court of New Jersey declined to allow a writ of certiorari to review the judgments of the state board of tax appeals. It did not mention the Thayer-Martin case, but followed Royal Mfg. Co. v. Board of Equalization, supra, saying that the New Jersey law on the point was 'settled and controlling.' 174 A. page 360, 12 N.J.Misc. p. 675. It, therefore, may well be true, as respondent ays, that the court in the Thayer-Martin case simply decided that the point raised by the taxpayer was not supported by facts and found it unnecessary to consider whether, if systematic discrimination had been shown, New Jersey would have afforded an adequate remedy. In any event, there is such uncertainty concerning the New Jersey remedy as to make it speculative (Wallace v. Hines, 253 U.S. 66, 68, 40 S.Ct. 435, 436, 64 L.Ed. 782) whether the State affords full protection to the federal rights. In the second place, the state board of tax appeals to which respondent might have appealed concededly has no right to pass on constitutional questions.³ Its judgments may be reviewed by the New Jersey Supreme Court by certiorari. The allowance of that writ, however, is not a matter of right, but purely discretionary.⁴ And the refusal of a writ of certiorari by the Supreme Court may not be judicially reviewed by the Court of Errors and Appeals.⁵ Accordingly we conclude that there was such uncertainty surrounding the adequacy of the state remedy as to justify the District Court in retaining jurisdiction of the cause. While the charges of discrimination in the complaint were denied, the jurisdiction of the District Court is determined by the allegations of the bill (Hart v. B. F. Keith Vaudeville Exchange, 262 U.S. 271, 43 S.Ct. 540, 67 L.Ed. 977) which here were substantial.

This brings us to the second phase of the controversy. Neither the District Court nor the Circuit Court of Appeals decided the case on federal grounds. They held in reliance on Duke Power Co. v. State Board, 129 N.J.L. 449, 30 A.2d 416, 420; Id., 131 N.J.L. 275, 36 A.2d 201, that the assessments were invalid under the New Jersey statutes. In that case, as in the present one, property 'omitted in the assessment' was attempted to be assessed by the County Board against the taxpayer after April 1st of each of the tax years involved without notice and hearing.⁶ The assessment was set aside as not being in conformity with the statute. And it was held that the remedial statutes,⁷ designed to cure irregularities in assessing or levying taxes, 'do not apply where the statute for the addition of property omitted from the assessment is not complied with.' 129 N.J.L. page 457, 30 A.2d page 420.

Petitioner argues that it is clear from Duke Power Co. v. State...