Abernathy v. Carpenter

Decision Date14 September 1962
Docket NumberNo. 723.,723.
Citation208 F. Supp. 793
PartiesEdward W. ABERNATHY et al., Plaintiffs, v. Milton CARPENTER, Director of Revenue for the State of Missouri, Defendant.
CourtU.S. District Court — Western District of Missouri

Meyer & Meyer, Stanford S. Meyer, Belleville, Ill., for plaintiff.

Thomas F. Eagleton, Atty. Gen., Robert D. Kingsland, Asst. Atty. Gen., Jefferson City, Mo., for defendant.

Before RIDGE, Circuit Judge, and GIBSON and BECKER, District Judges.

GIBSON, District Judge.

This is an action, brought by a large number of plaintiffs, all citizens and residents of the State of Illinois, against the Director of Revenue for the State of Missouri, pursuant to the provisions of 28 U.S.C.A. § 2281 and 28 U.S.C.A. § 2284. The purpose of the action is to enjoin defendant from collecting or attempting to collect certain Missouri state income taxes from plaintiffs and from assessing, or attempting to assess civil and criminal penalties against plaintiffs for failure to file Missouri state income tax returns.

Plaintiffs contend that they are being denied the "equal protection of the law" and "due process" by the actions of defendant pursuant to § 143.170 RSMo (1959) V.A.M.S. Said Section provides:

After providing deductions of $1,200 as a personal exemption, and $1,200 for a spouse, and $400 for each dependent "A nonresident individual may receive the benefit of the exemption provided for in this section only by filing or causing to be filed with the director of revenue a true and accurate return of his total income, received from all sources, corporate or otherwise, in this state, in the manner prescribed by this chapter; and in case of his failure to file such return the director of revenue shall collect the tax on such income, and all property belonging to such nonresident individual shall be liable to distraint for the tax."

Plaintiffs contend, in their amended complaint, that this provision is violative of Article IV, § 2, and Amendment XIV, § 1, of the Constitution of the United States, in that it "discriminates between the nonresident Plaintiffs and residents of the state of Missouri solely on the basis of State residence * * *"

Plaintiffs further contend that the statute is violative of the Fourteenth Amendment in that it is arbitrary and unreasonable because the amount of the penalty imposed upon nonresidents is beyond that necessarily required to enforce the tax against nonresidents.

A hearing was held by the statutory three-judge Court on August 20, 1962, at which time the Court took under advisement defendant's motion to dismiss, along with the full case on its merits.

At the hearing plaintiffs admitted that some power existed for the State of Missouri to impose sanctions against nonresidents different from those imposed upon residents of the State of Missouri, in order to enforce the collection of the tax. However, plaintiffs continue to maintain that the sanctions imposed by the state statute in question are arbitrary and unreasonable.

Plaintiffs admit that the State of Missouri might impose a penalty for failure of a nonresident to file a return which might consist of a reasonable percentage figure of the tax liability, but contend that any penalty based on a denial of personal exemptions, being by nature unequal between nonresidents who happen to have more or less personal exemptions than other nonresidents, is arbitrary and unreasonable.

The initial problem that arises is the question of the jurisdiction of this Court. There are two possible grounds for federal jurisdiction. One is the "federal question" jurisdiction contained in 28 U.S.C.A., § 1331. The other possible ground for jurisdiction is the "civil rights" provision contained in 28 U.S. C.A. 1343(3).

It seems clear that any matter which would come under the "civil rights" jurisdiction would also involve a federal question. However, it cannot be said that the jurisdiction conferred on the federal courts under these statutes is coextensive. The distinction between the two statutes appears in the case of Hague v. C. I. O., 307 U.S. 496, 59 S.Ct. 954, 83 L.Ed. 1028. Although there was no opinion of the Court, as such, in that case, the concurring opinion of Mr. Justice Stone makes the distinction between the two jurisdictional grounds, which this Court believes to be the correct interpretation.

Mr. Justice Stone pointed out that the statutes existed side by side and, therefore, neither could be interpreted as abolishing the other. He went on to say, at page 531 of 307 U.S., at page 971 of 59 S.Ct.:

"The conclusion seems inescapable that the right conferred by the predecessor of the current civil rights act to maintain a suit in equity in the federal courts to protect a suitor against a deprivation of rights or immunities secured by the Constitution, has been preserved, and that whenever the right or immunity is one of personal liberty, not dependent for its existence upon the infringement of property rights, there is jurisdiction * * * under the predecessor of 28 U.S.C.A., § 1343 to entertain it without proof of jurisdictional amount." (Emphasis supplied)

In the case at bar, the deprivation, if there be any, is not one of personal liberty, but merely a property right, i. e., the right under all circumstances to deduct certain exemptions from gross income for purpose of an income tax. The plaintiffs may avail themselves of the personal exemptions as a matter of right by duly filing their tax returns in accordance with the provisions of the statute.

In the case of Holt v. Indiana Manufacturing Co., 176 U.S. 68, 20 S.Ct. 272, 44 L.Ed. 374, defendants, who were tax officers of a county in the state of Indiana, attempted to levy a personal tax against the capital assets of plaintiff. Plaintiff alleged that these capital assets consisted entirely of letters patent issued by the United States government, which were not subject to state taxation. In discussing jurisdiction under the predecessor of our current Civil Rights Act the Court stated, at page 72 of 176 U.S., at page 273 of 20 S.Ct.:

"* * * it is sufficient to say that the Civil Rights Statutes refer to civil rights only and are inapplicable here."

The Court is aware of the case of Schlosser v. Welsh, D.C., 5 F.Supp. 993, cited by plaintiffs. In that case, defendant was attempting to assess an income tax of the State of South Dakota against plaintiffs who worked for the federal government. The taxing statute involved, as interpreted by defendant, excluded from its operation all income received from the federal government by officers thereof, as remuneration, but not that income received from the federal government by employees thereof. Defendant had ruled that plaintiffs were employees of the federal government, and not officers, and, therefore, were liable for the tax. The Court first found no jurisdiction under the "federal question" provision, due to a lack of the requisite jurisdictional amount. However, it went on to find jurisdiction under the "civil rights" provision. First stating that jurisdiction must be determined by looking at the statements made in the complaint to determine whether they, standing alone, disclose that there is a real or substantial controversy over which the Court has jurisdiction, the Court went on to say, at page 997 of 5 F.Supp.:

"Turning now to the bill of complaint, it is observed that one of the allegations and claims is that defendant has arbitrarily excluded plaintiffs from a class to which logically and lawfully they belong * * *. This, we think, presents a controversy over which this court has jurisdiction."

It is clear that in the Schlosser case, the Court based its opinion on the question of jurisdiction on the undoubtedly correct recognition of that fact that the arbitrary exclusion of a person rightfully belonging to a class of persons legally immune from state taxation is a denial of the "equal protection" clause of the Fourteenth Amendment.

Thus the case at bar may be distinguished from the Schlosser case. None of the many plaintiffs in the case at bar claim to belong to a class of persons which is legally immune from the Missouri income tax. The claim is simply that they are arbitrarily denied certain exemptions as a penalty for not duly filing their Missouri State Income Tax returns. This is not a circumstance within the purview of the "civil rights" jurisdiction, as it is solely a property or monetary right and not a right of "personal liberty," as these terms are used by Mr. Justice Stone in the case of Hague v. C.I.O., (cited supra).

There being no jurisdiction under the "civil rights" provision, 28 U.S. C.A. § 1343, the sole possible remaining ground for federal jurisdiction is the "federal question" provision, 28 U.S.C.A. § 1331. However, this statute requires, in addition to a federal question, an amount in controversy in excess of $10,000. Admittedly, none of the plaintiffs individually can attain this requisite amount. Further, the individual claims may not be aggregated to achieve the $10,000 amount necessary to confer jurisdiction on this Court, in a class action such as this. This is made clear by both the Hague case and the Schlosser case, (both cited supra), and the cases...

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