Butler v. DA Schulte, Inc.

• Decision Date: 15 November 1933
• Docket Number: No. 7017.,7017.
• Citation: 67 F.2d 632
• Parties: BUTLER et al. v. D. A. SCHULTE, Inc.
• Court: U.S. Court of Appeals — Fifth Circuit

67 F.2d 632 (1933)

BUTLER et al. v. D. A. SCHULTE, Inc.

No. 7017.

Circuit Court of Appeals, Fifth Circuit.

November 15, 1933.

R. B. Evins and Matt H. Murphy, both of Birmingham, Ala., for appellants.

William S. Pritchard, of Birmingham, Ala., for appellee.

Before BRYAN, FOSTER, and HUTCHESON, Circuit Judges.

HUTCHESON, Circuit Judge.

The Tobacco Tax Act, Acts of the Alabama Legislature approved October 22, 1932 (Gen. Acts Ala. 1932, Ex. Sess., p. 114), imposing a graduated license or privilege tax on articles including tobacco, set it at 1 cent for each package of cigarettes retailing at 5 cents, with an additional 1-cent tax for each additional 5 cents or fraction of the retail selling price.

As though the phrase "retail price" was not sufficiently definite in itself, it was undertaken by subdivision 9 of section 1 to further define it:

"(a) Whenever in this Section reference is made to any manufactured tobacco products, manufactured or imported to sell at a certain price, as the basis for computing the tax, it is intended to mean the ordinary, customary, or usual price paid by the consumer for each individual cigar, package of cigarettes, package of smoking tobacco, or any other tobacco products taxable under this Act.

"(b) When the retail or selling price is referred to in this Act as the basis for computing the amount of stamps required on any article, it is intended to mean the retail or selling price of the article before adding the amount of the tax."

The act requires the payment of the tax through the use of stamps to be affixed to the retail container. It gives each retailer twenty-four hours after receipt to affix the stamps. For its enforcement the act provides penalties to be collected by suit and makes packages not stamped as required by law seizable as contraband.

The procedure upon seizure for confiscation permits any claimant of the goods to obtain them back to be held pending the outcome of forfeiture proceedings to be instituted by the solicitor of the circuit, by posting a bond in double the value of the goods, conditioned to pay their value. Plaintiff, a resident and citizen of New York, alleging that it operates two retail stores in Birmingham in which it retails Old Gold, Camels, Lucky Strike, and other standard brands of cigarettes at 10 cents per package, and that it had affixed the 2-cent stamp required by law thereto, brought this bill on March 11, 1933, against the state tax commission of Alabama and others to restrain them from confiscating the cigarettes for the failure of plaintiff to accede to the demands of the tax commission that it affix on each package an additional 1-cent stamp. This demand was grounded on the claim of the commission that though plaintiff did sell the packages at 10 cents this was not their retail price; that as actually established in the trade, it was more. It alleged that defendants were about to seize and confiscate its stock and destroy its tobacco business, and unless restrained, would do so. That if this should occur plaintiff would suffer irreparable injury not only in that its business would be destroyed, but that the defendants, each and all of them, were insolvent and unable to respond in damages. Further alleging that because of the financial condition of the state of Alabama, if appellee should pay the tax and sue for it back, it could not hope to recover it, it averred that without adequate remedy at law it was wholly dependent for relief upon the equitable jurisdiction. There was a further allegation that the state tax commissioners were discriminating against plaintiff by permitting an arrangement to be made with some dealers, which it denied to plaintiff, and a prayer to restrain their doing so, but in view of the answer and the proof this demand was not pressed below and is not before us.

The District Judge granted a restraining order pending the hearing, and the jurisdiction resting on diversity, and the injunction against the seizure being sought, not on the ground of the unconstitutionality of the statute, but of the unlawful acts of the officers, set the matter down for hearing without calling other judges to his assistance. Ex parte Hobbs, 280 U. S. 168, 50 S. Ct. 83, 74 L. Ed. 353; Ex parte Williams, 277 U. S. 267, 48 S. Ct. 523, 72 L. Ed. 877; Hawks v. Hamill, 288 U. S. 53, 53 S. Ct. 240, 77 L. Ed. 610.

On March 17 respondents appeared asserting that by retail price the statute meant the usual retail price and that the price at which plaintiff sells was not that ordinary price. That the law of Alabama requires each retailer, no matter at what price he actually sells, to affix stamps to the package in accordance with the ordinary, customary, and usual price at which cigarettes are sold. They admitted if plaintiff did not affix the additional stamp they would forthwith and immediately remove all his stock and confiscate it. They specifically denied the paragraph alleging discrimination and that went out of the case. On April 22d respondents amended their answer by pleading that a statute had been passed since the filing of the bill amending subdivision (a) of subsection 9, § 1 (Gen. Acts Ala. 1933, Ex. Sess., p. 187), so as to make it read: "(A) Whenever in this Section the word `retail' or `retailing' is used as the basis for computing the tax herein levied, it shall be taken to mean the retail selling price at which a majority of the retail dealers in Alabama sell at retail the articles or commodities mentioned. In determining what the retail selling price of the majority of the dealers in Alabama is for such articles or commodities, any retailer operating or being concerned in more than one retail establishment, shall be counted as one dealer without reference to the number of retail stores or establishments such dealer operates or is concerned in," and that the retail selling price of the majority of retail dealers in Alabama was more than 10 cents a package.

Plaintiff, attacking the statute as vague, uncertain, and indefinite, and void for many reasons named in its motion, moved to strike the amended answer. It also amended its bill to plead more fully the involved financial condition of the state of Alabama, that warrants issued by it could not be paid for many years, and that such warrants bore no interest. It also alleged that there were many others in the same situation as plaintiff, and that for each of the persons involved to have to sue on account of the tax would entail expensive and endless litigation.

On May 13, after hearing the oral testimony of several witnesses, the court upon the ground that the statute as originally enacted measured the tax by the price at which each package was actually sold, that under the evidence before him the amendment was too vague, indefinite and uncertain to measure it, and that complainant had no plain and adequate remedy at law under the allegations of the bill and the facts shown to exist on the hearing, granted the temporary injunction.

Appellants, attacking the decree first as wrong for the want of equitable jurisdiction, say that under the statutes of Alabama appellee has an adequate remedy at law by paying the tax and suing for it back. They say further that no case for injunction was made out on the allegations of the bill.

Clear and compelling both in general and by the statutes of the United States as is the rule that where there is an adequate remedy at law, federal equity jurisdiction will not be exerted, especially in restraint of state officers, Matthews v. Rodgers, 284 U. S. 521, 52 S. Ct. 217, 76 L. Ed. 447, Schoenthal v. Irving Trust Co., 287 U. S. 94, 53 S. Ct. 50, 77 L. Ed. 185, Northport Power & Light Co. v. Hartley, 283 U. S. 569, 51 S. Ct. 581, 75 L. Ed. 1275, and binding its corollary, that where administrative remedies are afforded the taxpayer, he must exhaust these before coming into equity, Gorham Mfg. Co. v. State Tax Comm., 266...