City of Fort Worth v. Southwestern Bell Telephone Co.

• Decision Date: 02 January 1936
• Docket Number: No. 7797.,7797.
• Citation: 80 F.2d 972
• Parties: CITY OF FORT WORTH et al. v. SOUTHWESTERN BELL TELEPHONE CO.
• Court: U.S. Court of Appeals — Fifth Circuit

80 F.2d 972 (1936)

CITY OF FORT WORTH et al. v. SOUTHWESTERN BELL TELEPHONE CO.^*

No. 7797.

Circuit Court of Appeals, Fifth Circuit.

January 2, 1936.

R. E. Rouer and R. M. Rowland, both of Fort Worth, Tex., for appellants.

Wm. E. Allen, of Fort Worth, Tex., and Nelson Phillips and Wm. H. Duls, both of Dallas, Tex., for appellee.

Before SIBLEY and HUTCHESON, Circuit Judges, and STRUM, District Judge.

SIBLEY, Circuit Judge.

The city of Fort Worth and Independent School District of Fort Worth, each being a public corporation of Texas, having the same power of taxing property within its limits and having the same tax officers and substantially the same territorial limits, in 1927 for the first time assessed for taxation as a separate item of property the "easement" of the Southwestern Bell Telephone Company in the streets and alleys of Fort Worth in virtue of which its poles and wires and underground cables and conduits are maintained therein. To stop enforcement of the allegedly void tax by levy, which it was said would disrupt the telephone service and cause irreparable and unascertainable damage, and to remove the cloud upon title created by the asserted tax lien, the telephone company, there being diversity of citizenship and more than $3,000 involved, filed its bill for injunction in the federal court. A motion to dismiss it was pursuant to a full written opinion overruled, and, after a hearing upon agreed facts, a decree was given for a perpetual injunction. The assignments of error mainly contend that there was an adequate remedy at law, and that the thing assessed was assessable property and not, as the district court held, a mere franchise taxable by the state only under its occupation tax law.

The remedies at law claimed to be adequate are: (1) An appeal from the assessment to the board of equalization, and from the board to the state district court as provided in the city charter; and (2) payment of the tax under protest and an action at law to recover it. As to the first, the District Judge held that the tribunals reviewing the assessment are by the language of the charter restricted to the question of value, and are not to deal, at least finally, with questions of title or power. This construction appears plausible and no decision of the state courts to the contrary is cited. Indeed, the Supreme Court in Texas & Pac. Ry. Co. v. City of El Paso, 85 S.W.(2d) 245, where the city was suing to collect a tax, held that the unappealed action of the board of equalization was not final even on valuation when fundamental rules were violated. That a void assessment need not be appealed from in order to have relief in equity, see Davis v. Burnett, 77 Tex. 3, 13 S.W. 613; Court v. O'Connor, 65 Tex. 334. The valuation is not brought in question at all in the present bill, but only the power to tax. Appeal to the state district court under the charter would not test this question. Certainly it is not such a clear and adequate remedy as to deprive a federal court of equity of its power to relieve, even if such an appeal could be removed to a federal court for trial. That the remedy at law must be one available in a federal court, see Risty v. Chicago, R. I. & Pac. Ry. Co., 270 U. S. 378, 388, 46 S.Ct. 236, 70 L.Ed. 641; Chicago, B. & Q. R. R. Co. v. Osborne, 265 U.S. 14, 44 S.Ct. 431, 68 L.Ed. 878. Touching the remedy by payment and suit in a federal court of law, we agree with the district judge that it is not clear and certain enough to exclude equity. No Texas statute nor provision in the charter of Fort Worth gives or recognizes such a right. The common law on the subject as fixed by the Texas cases, and by which as a rule of decision the federal court would in a law case be bound, is not well settled. A taxpayer though paying under compulsion and under protest an invalid tax has no such remedy against a collecting officer who has a process valid on its face. Continental Land & Cattle Co. v. Board, Collector, 80 Tex. 489, 16 S.W. 312. But that he may recover of a governmental division what it thus receives is held in Galveston Gas Co. v. County of Galveston, 54 Tex. 287. Yet whether the payment was under compulsion or voluntary seems to be a question of fact, and if not under compulsion, no recovery will be allowed. City of Houston v. Feeser, 76 Tex. 365, 13 S. W. 266. In State v. Hoffman, 109 Tex. 133, 136, 201 S.W. 653, the court seems to hold that a person is not bound to pay and then sue to recover an illegal tax, but that he should properly pay only what is rightly due and enjoin the collection of the illegal exaction, as Hoffman had done. A Court of Appeals held in Davies' Executors v. Galveston, 16 Tex.Civ.App. 13, 41 S.W. 145, that notwithstanding the decision in Galveston Gas Co. v. County of Galveston, supra, and though the taxpayer paid the exaction after a levy on its property and advertisement for its sale, the payment was voluntary and could not be recovered. A strict rule was also applied in City of Laredo v. Loury (Tex.App.) 20 S.W. 89. The practice in Texas apparently is to be liberal with injunctions before payment but opposed to recoveries afterward. "Where equity can give relief, plaintiff ought not to be compelled to speculate upon the chance of his obtaining relief at law." Davis v. Wakelee, 156 U.S. 680, 15 S.Ct. 555, 558, 39 L.Ed. 578; Wallace v. Hines, 253 U.S. 66, 40 S.Ct. 435, 64 L.Ed. 782; Union Pacific R. R. Co. v. Board of Com'rs of Weld County, 247 U.S. 282, 38 S.Ct. 510, 62 L. Ed. 1110; Dawson v. Kentucky Distilleries & Warehouse Co., 255 U.S. 288, 41 S.Ct. 272, 65 L.Ed. 638; Atlantic Coast Line R. Co. v. Doughton, 262 U.S. 413, 43 S.Ct. 620, 67 L.Ed. 1051.

Turning to the main question whether the thing taxed be taxable, the case stands thus: The "Home Rule Amendment" of the Texas Constitution, art. 11, § 5, adopted in 1912, under which Fort Worth set up its charter, gives to cities having more than 5,000 inhabitants power to levy, assess, and collect such taxes as are authorized by law or by their charters provided they are not inconsistent with the Constitution or a general law. Article 1175, Rev. Stats. of 1925, passed to regulate such cities, in paragraph 7 gives them power to levy any general or special ad valorem tax for any purpose not inconsistent with the Constitution, and paragraph 8 specially authorizes them to provide for the method "of assessing taxes, both real and personal, against any person and corporation, including the right to assess the franchise of any public corporation using and occupying the public streets or grounds of the city, separately from the tangible property of such corporation." The Fort Worth charter besides general provision for ad valorem taxation of all real and personal property within the city contains these provisions: "The right to use the public streets, highways, alleys and thoroughfares of the city which necessitates the digging up or displacement thereof for the installation of equipment, appliances or appurtenances either on, above or below the surface of the same to make the intended use thereof practicable, shall be deemed and considered a franchise," etc.; and, "All rights, privileges and franchises heretofore or hereafter granted to be held by any person, firm or corporation in the streets, alleys, highways or public grounds or places in said city shall be subject to taxation by said city separately from and in addition to the other assets of such person, firm or corporation. * * *" There thus appears prima facie authority to tax the thing here assessed under the description of an easement, whether it be truly a property easement or whether it be a mere special right to use the streets and more accurately called a franchise. The Supreme Court in Texas & Pacific Ry. Co. v. City of El Paso, 85 S.W.(2d) 245, at page 249 says: "There exists a clear distinction between a franchise and an easement. The grant of a franchise does not carry with it an interest in land. It is a privilege which may be granted and acquired without involving the ownership of land. On the other hand, an easement is essentially an interest in land. It is a dominant estate imposed upon a servient estate. The privilege of using the streets for railway purposes is a franchise. The actual occupation of the streets for railroad purposes by virtue of ordinances is an easement." It was there held that whether as a franchise or an easement the railway company's occupancy of the streets of El Paso was taxable ad valorem. The Southwestern Telephone Company does not appear to have entered the city of Fort Worth by virtue of any city ordinance, but it derives its rights from a statute passed in 1874, now Rev. Stats. of 1925, art. 1416: "Corporations created for the purpose of constructing and maintaining magnetic telegraph lines, are authorized to set up their poles, piers, abutments, wires and other fixtures along, upon and across any of the public roads, streets and waters of this State, in such manner as not to incommode the public in the use of such roads, streets and waters." Article 1420 permits leases and sales of the lines of such companies. Article 1422 gives the municipal authorities by ordinance or otherwise the right to control the placing of the poles and wires, and upon a hearing to alter the same. This legislation includes telephone companies. San Antonio & Aransas Pass Ry. Co. v. S. W. Telegraph & Telephone Co., 93 Tex. 313, 55 S.W. 117, 49 L.R.A. 459, 77 Am.St. Rep. 884. When the Southwestern Bell Telephone Company or its predecessor upon the faith of this statute invested its money by...