John M. Hirst & Co. v. Gentsch

• Decision Date: 08 February 1943
• Docket Number: No. 9244.,9244.
• Citation: 133 F.2d 247
• Parties: JOHN M. HIRST & CO. v. GENTSCH.
• Court: U.S. Court of Appeals — Sixth Circuit

133 F.2d 247 (1943)

JOHN M. HIRST & CO. v. GENTSCH.

No. 9244.

Circuit Court of Appeals, Sixth Circuit.

February 8, 1943.

William A. Southworth, of Cleveland, Ohio (Squire, Sanders & Dempsey, Edwin H. Chaney, and William A. Southworth, all of Cleveland, Ohio, on the brief), for appellant.

Joseph M. Jones, of Washington, D. C. (Samuel O. Clark, Jr., Sewall Key, J. L. Monarch, and Fred J. Neuland, all of Washington, D. C., and Don C. Miller and F. B. Kavanagh, both of Cleveland, Ohio, on the brief), for appellees.

Before SIMONS, MARTIN, and McALLISTER, Circuit Judges.

SIMONS, Circuit Judge.

The single question presented upon the appeal relates to the jurisdiction of the court to restrain collection of taxes assessed against the appellant under the Federal Insurance Contributions Act (Internal Revenue Code, Chapt. 9, sub-Chapt. A, § 1400 et seq., approved February 10, 1939, 53 Stat. 175, 26 U.S.C.A. Int.Rev.Code, § 1400 et seq.), and the Federal Unemployment Tax Act (Internal Revenue Code, Chapt. 9, sub-Chapt. C, § 1600 et seq., 53 Stat. 183, 26 U.S.C.A. Int.Rev.Code, § 1600 et seq). The District Court dismissed the bill on the ground that it lacked jurisdiction in view of § 3653 of Title 26 U.S.C.A. Int. Rev.Code, and also upon the ground that the complaint sets forth no facts which, if true, would entitle plaintiff to the relief prayed for.

The amended complaint alleges the plaintiff to be a partnership engaged in the production of bituminous coal in Carroll County, Ohio. Its mine has been operated since 1925 by members of the partnership, and was acquired from a predecessor partnership which previously had acquired it from a corporate owner. It is alleged that the members of the plaintiff's partnership organization receive their compensation only by way of semi-monthly distributions from partnership earnings, and that the taxes which the Collector has sought from it, were assessed wholly with respect to such distributions. It is asserted that the partnership is not subject to such taxes, nor to the penalties which have been added thereto; that the partnership is unable to pay such taxes, penalties, and interest, without liquidation of its property, and that if the Collector, whose duty it is to collect them, proceeds to do so by distraint or levy, the plaintiff will be forced into complete cessation of its mining operations and its business will be ruined. It alleges, therefore, that it has no adequate remedy at law.

Section 3653 of the Internal Revenue Code was formerly § 3224 of the Revised Statutes, and provides: "Except as provided in sections 272(a), 871(a), and 1012 (a), no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court."

It has been construed in a long line of cases to withdraw from the courts the power to restrain assessment or collection of taxes where the challenge is to the validity or applicability of the tax. Its restraint is not, however, absolute, and beginning with Dodge v. Brady, 240 U.S. 122, 126, 36 S.Ct. 277, 60 L.Ed. 560, through Hill v. Wallace, 259 U.S. 44, 42 S.Ct. 453, 66 L.Ed. 822, and Miller v. Standard Nut Margarine Co., 284 U.S. 498, 509, 52 S.Ct. 260, 76 L.Ed. 422, an exception to the universality of its application has been recognized in cases which, though apparently within its terms, present extraordinary and entirely exceptional circumstances to make its provisions inapplicable. The latest case to sustain the jurisdiction of the court to take cognizance of a suit for injunction, is Allen, Collector v. Regents of the University, 304 U.S. 439, 448, 58 S.Ct. 980, 82 L. Ed. 1448. It must be observed, however, that the later decisions were not reached without vigorous protest by members of the present court, including the Chief Justice.

The...