American Airways v. Wallace

• Decision Date: 31 March 1932
• Docket Number: No. 475.,475.
• Citation: 57 F.2d 877
• Parties: AMERICAN AIRWAYS, Inc., v. WALLACE, Comptroller, et al.
• Court: U.S. District Court — Middle District of Tennessee

57 F.2d 877 (1932)

AMERICAN AIRWAYS, Inc., v. WALLACE, Comptroller, et al.

No. 475.

District Court, M. D. Tennessee.

March 31, 1932.

J. W. Canada and C. P. J. Mooney, both of Memphis, Tenn., for plaintiff.

L. D. Smith, Atty. Gen., of Tennessee, and Roy H. Beeler, Asst. Atty. Gen., for defendants.

Before MOORMAN, Circuit Judge, and GORE and DAWSON, District Judges.

PER CURIAM.

This is a suit in equity to enjoin defendants, who are state officials, from collecting a state gasoline tax, imposed by the Tennessee Legislature, chapter 58, Pub. Acts of 1923, amended by chapter 67, Pub. Acts of 1925, on the ground that the tax imposes a burden upon interstate commerce, in violation of the commerce clause of the Constitution of the United States, article 1, § 8.

Chapter 58, Pub. Acts of 1923, imposes a tax upon all persons, corporations, etc., engaged in and carrying on the business of "selling" gasoline and distillate in the state. Chapter 67, Pub. Acts of 1925, amends chapter 58, Pub. Acts of 1923, increases the tax, and enlarges the scope of the law so as to include "storers" and "distributors" of gasoline. It provides that "storers and distributors shall compute and pay this tax on the basis of their withdrawals or distributions" and that the tax shall accrue whether such withdrawal be for sale "or other use."

Defendant McCabe is commissioner of Finance and Taxation for Tennessee. It is his duty, as such official, to issue permits to persons, firms, corporations, etc., engaged in or carrying on the business of selling, distributing, or storing gasoline or its distillate, and engaging in such business without such permit is made a misdemeanor.

Defendant Wallace is comptroller of the state, and it is his duty to collect the tax imposed by the statutes referred to, and if it is not paid when due, he is authorized to issue distress warrants to collect same. The tax is computed upon the amount of gasoline withdrawn, and is payable monthly, on or before the 20th day of the succeeding month in which it is withdrawn. The tax is a "special privilege tax, in addition to all other taxes, for engaging in such business in this State."

The present hearing is upon plaintiff's application (266 Judicial Code, 28 USCA § 380), for a temporary injunction to enjoin the collection of taxes.

Plaintiff is a nonresident corporation, and a common carrier, engaged in the business of hauling and transporting freight, passengers, and the United States mails, by aeroplane from points outside the state of Tennessee to cities within the state of Tennessee, and from points within the state, to points outside thereof. In carrying on its business, its planes stop at three landing fields in the state, at which points it receives and discharges freight, mail, and passengers. Gasoline is the power used to propel its planes, and they must be refueled at the above landing fields. Practically all of plaintiff's business consists of interstate commerce. It has no terminal in the state of Tennessee. However, it conducts a small intrastate transportation business, from which it derives an insignificant portion of its revenue.

It buys its gasoline in tank cars outside of the state; and brings it by railroad into the state, and stores it in private tanks, and when the gasoline is needed, it is withdrawn and put into its aeroplanes for motor fuel. It is averred that the gasoline is not, and will not, be withdrawn from storage for any other purpose whatever.

It is contended by plaintiff that the tax imposed cannot apply to it, because it is engaged in interstate commerce; and that the gasoline is an instrumentality of interstate commerce; that if the act does apply to such operations, then it is unconstitutional, because in violation of the commerce clause of the Federal Constitution.

Defendants filed their joint answers to the original and amended bills, in which they insist that the act applies to plaintiff's operations, even if it be engaged in interstate commerce, and contend that the act is not a regulation of, or burden upon, interstate commerce, or violative of the commerce clause of the Federal Constitution. They make the further contention that this suit cannot be maintained, because they say plaintiff has a plain, adequate, and specific remedy at law, by payment of the tax under protest, and suit to recover same, as provided by Tennessee statutes.

Considering the last defense first:

Chapter 44 of the Acts of the Tennessee Legislature in 1873 (Shannon's Code, § 1059 et seq.) provides that if a taxpayer conceives a tax claimed against him to be unjust, or illegal, or against any statute, he shall pay the same under protest and that he may, at any time within thirty days, and not longer thereafter, sue the official having collected same from him, for the recovery thereof, and same may be tried in any court having jurisdiction of the amount involved and the parties. And if it be determined that the tax was wrongfully collected, for any reason going to the merits thereof, then the court trying the case may certify that same was wrongfully paid and ought to be refunded, "and thereupon the comptroller shall issue his warrant for the same, which shall be paid in preference to other claims on the treasury." (Shannon's Code, § 1062.) Section 2 of the act (Shannon's Code, §§ 1063, 1064) provides that: "There shall be no other remedy in any case of the collection of revenue, or attempt to collect revenue illegally * * * and no writ for the prevention of the collection any revenue claimed, or to hinder and delay the collection of the same, shall in any wise issue, either injunction, supersedeas, prohibition, or any other writ or process whatever; but in all cases in which, for any reason, any person shall claim that the tax so collected was wrongfully or illegally collected, the remedy for said party shall be as above provided, and in no other manner."

This statute is constitutional. City of Nashville v. Smith, 86 Tenn. 213, 6 S. W. 273; Louisville & N. Railroad Co. v. State, 55 Tenn. (8 Heisk.) 663, et seq.

No one would contend that the collection of a tax may be enjoined if the taxpayer has a full and adequate remedy at law. But it is equally well settled that a court of equity has jurisdiction to enjoin the collection of a tax alleged to be illegal, where plaintiff has not a full, free, complete, and adequate remedy at law. The authorities upon this question are uniform and too numerous for collation. The Supreme Court, in Davis v. Wakelee, 156 U. S. 680, 15 S. Ct. 555, 558, 39 L. Ed. 578, cited and approved in Dawson v. Kentucky Distilleries, 255 U. S. 296, 41 S. Ct. 272, 65 L. Ed. 638, stated that a court of equity will not decline cognizance of a suit "if the remedy at law be doubtful."

In applying the test as to whether courts will entertain a suit in equity to enjoin the collection of a tax, the court must look to the probable consequences or damages resulting to plaintiff if the injunction is not granted. It is quite apparent that, from the facts averred in the petitions and admitted in the answers, if plaintiff is not liable for the tax, it does not have an adequate remedy at law, because the law provides for the payment of the tax monthly, on or before the 20th of each month succeeding the withdrawal, which may be paid under protest, and then the taxpayer has thirty days from date of payment, in which to bring suit for refund thereof. To force plaintiff to its remedy at law would necessarily result in a multiplicity of suits, involving much expense in such items as attorney's fees, costs, etc. There are other reasons shown in the record, which might influence us to conclude that plaintiff's remedy at law is not adequate; but from the view we take of the case, it is deemed unnecessary to comment further upon this ground of defense, as the case will be disposed of upon the proposition that the act does not impose an unlawful burden upon, or undertake to regulate, interstate commerce, in which plaintiff is engaged.

Chapter 67, Pub. Acts of 1925, was declared constitutional by the Supreme Court of Tennessee in the case of Foster & Creighton v. Graham, Comptroller, 154 Tenn. 512, 285 S. W. 570, 572, 47 A. L. R. 971, where it was held that the tax was an "excise" tax upon the use and consumption of gasoline, and that it was intended to reach the consumer who purchased gasoline in interstate commerce and allowed it to be withdrawn from storage for sale or "other use." In that case, Foster & Creighton, who were contractors in Tennessee, purchased their gasoline in a foreign state, transported it by railroad in tank cars, stored it in their private tanks in the state, and then withdrew it as needed, to be used as motor power in the construction of public roads in Tennessee; there it was said: "We think the act, when properly interpreted, not only applies to distributors and dealers in gasoline, but applies to consumers who purchase gasoline in interstate commerce and store it, and thereafter distribute the same, or allow the same to be withdrawn from storage whether such withdrawal be for sale or other use. It therefore necessarily follows that complainant, and all other persons, etc., in like situations, come within the provisions of said act."

Plaintiff attempts to distinguish the instant case from the Foster & Creighton Case, upon the ground that the gasoline withdrawn in the latter case was intended to, and was in fact, used in construction of public highways within the state, while it uses its gasoline in aeroplanes, engaged in interstate commerce, and that the gasoline, therefore, is an instrumentality of interstate commerce. It is uniformly held that an instrumentality of interstate commerce cannot be regulated or burdened by state taxation when the same tax would not apply to the subject of the commerce. Helson & Randolph v. Kentucky, 279 U. S. 245, 49 S. Ct. 279, 73 L. Ed. 683. It is not a regulation of or burden upon...