City of Hattiesburg v. First Nat. Bank of Hattiesburg

• Decision Date: 22 August 1934
• Docket Number: No. 7761.,7761.
• Parties: CITY OF HATTIESBURG v. FIRST NAT. BANK OF HATTIESBURG.
• Court: U.S. District Court — Southern District of Mississippi

8 F. Supp. 157

CITY OF HATTIESBURG v. FIRST NAT. BANK OF HATTIESBURG.^*

No. 7761.

District Court, S. D. Mississippi, Jackson Division.

August 22, 1934.

Green, Green & Jackson and Harold Cox, all of Jackson, Miss., for City of Hattiesburg.

Watkins & Eager, of Jackson, Miss., for the bank.

HOLMES, District Judge.

The city of Hattiesburg, by due process of law, is proceeding to assess and collect ad valorem taxes from the First National Bank of Hattiesburg, Miss., as agent for its shareholders, upon its personal property (denominated "surplus"), valued at $250,000, for each of the years 1930, 1931, and 1932, which it claims escaped taxation for said years. The proceeding was instituted by the state tax collector, pursuant to the authority conferred upon him by section 6991 of the Mississippi Code of 1930, and the laws amendatory thereof, who gave notice to the city tax assessor to proceed to enter on his rolls an assessment of said property against said bank, as agent for its shareholders, for the years and in the amounts stated, and to file the same with the clerk of the city commission of Hattiesburg, to be dealt with by him as provided by law. The assessment having been made and filed with the clerk by the city assessor, as directed by the state tax collector, notice that the same had been received and would come on for hearing before the board of mayor and commissioners of said city on June 22, 1933, was duly given to the First National Bank, as required by the statutes, and in response to said notice the bank, by its officers and attorneys, appeared and protested against said assessment, praying that it be disallowed, abrogated, and set aside for each of said years, as all taxes due by it or its shareholders had been fully paid, and as any additional assessment was wholly unauthorized by state or federal law. The matter came on for hearing on the date named, and, the same being had, after a consideration of the protest filed by the bank, the board approved the assessments for 1931 and 1932, but passed over for the time being that for 1930. Accordingly, it entered an order instructing the city clerk to furnish to the city tax collector a certified copy of the assessments for the fiscal years 1931 and 1932, and instructed the latter to collect the taxes thereon in the manner provided by law.

Feeling aggrieved by the decision of the municipal board, the bank appealed to the circuit court of the county by giving bond, with sufficient sureties, in accordance with section 62 of the Mississippi Code of 1930, which authorizes the appeal; provides for the making and filing of "a true copy of any papers on file relating to such controversy" in the office of the clerk of the circuit court on or before its next term; and that "the controversy shall be tried anew in the circuit court at the first term, and be a preference case," the judgment to be certified to the municipal board which shall conform thereto. The appeal to the circuit court, as a "preference case," having been perfected, the bank in due time filed its petition and bond to remove the same to the District Court of the United States for this district, on the ground that it is "a suit of a civil nature, at law or in equity, arising under the Constitution and laws of the United States," and that the matter in controversy exceeds the value of $3,000, exclusive of interest and costs. The rate levied being 26 mills per annum upon a valuation of $250,000, it is undisputed that the amount involved is sufficient for jurisdictional purposes, but is it a "suit" which "arises under the Constitution and laws of the United States," of which this court is given removal jurisdiction, is the compound question presented by the motion to remand made on behalf of the city.

Since the proceeding before the board of mayor and commissioners was administrative, the contention is made that it continues at least partly so upon appeal to the circuit court of the county, and that removal may not be had to the federal court of a tax proceeding which, though partly judicial, is essentially administrative in character; citing Upshur County v. Rich (1890), 135 U. S. 467, 10 S. Ct. 651, 34 L. Ed. 196; First National Bank v. Gildart (C. C. A. 1933) 64 F.(2d) 873, 874. In the former case, an appeal, under a state law, from an assessment of taxes to "a county court," which, in respect to such proceeding, acts not as a judicial body, but as a board of commissioners, without judicial powers, only authorized to determine questions of quantity, proportion, and value, was held not a "suit" which could be removed into a circuit court of the United States. The case was decided against removability because of lack of judicial powers in the county court under the laws of West Virginia, the county court in that state having no judicial powers, except in matters of probate. In all other matters it was an administrative board, charged with the management of county affairs. It was composed of three commissioners, two of whom constituted a quorum. At page 472 of 135 U. S., 10 S. Ct. 651, 653, the court said: "In our judgment it was not a suit within the meaning of the removal act, though approaching very near to the line of demarcation. We cannot believe that every assessment of property belonging to the citizen of another state can be removed into the federal courts. Certainly the original assessment made by the township or county assessors, could not be called a suit, and could not be thus removed; and there is, justly, no more reason for placing an assessment on appeal within that category. It is nothing but an assessment in either case, which is an administrative act. The fact that the board of appeal may swear witnesses does not make the proceeding a suit. Assessors are often empowered to do this without altering the character of their functions."

After referring to a number of decisions of the Supreme Court of Appeals of West Virginia, establishing "that the action and decision of a designated officer or board, whether the same be a court or other body, in reviewing and correcting an assessment of corporate or other property for taxation, are no more judicial acts than the acts of the officer or authority making the original assessment," because "the decision or finding of such officer or board, even if the same be a court or other judicial tribunal, is not such a judicial act or judgment as can be reviewed by a supreme or appellate court possessing judicial powers only," Mr. Justice Bradley stated at page 473 of 135 U. S., 10 S. Ct. 651, 653: "In these views we concur. At the same time we do not lose sight of the fact, presented by every day's experience, that the legality and constitutionality of taxes and assessments may be subjected to judicial examination in various ways, — by an action against the collecting officer, by a bill for injunction, by certiorari, and by other modes of proceeding. Then, indeed, a suit arises which may come within the cognizance of the federal courts, either by removal thereto, or by writ of error from this court, according to the nature and circumstances of the case. Even an appeal from an assessment, if referred to a court and jury, or merely to a court, to be proceeded in according to judicial methods, may become a suit within the act of congress. But the ordinary acts and doings of assessors, or of appellate boards of assessors, in passing upon matters of mere valuation, appraisement, or proportionate distribution of expense, belong to a different class of governmental functions, executive and administrative in their character, and not appertaining to the judicial department. If an illegal principle of valuation be adopted, or an unconstitutional assessment or tax be made or imposed, or fraud be practiced, it may be examined by one of the judicial methods referred to, and thus become the subject of a suit. The question, what is a `suit,' in the sense of the judiciary laws of the United States, has been frequently considered by this court particular reference being made to numerous authorities at page 474 of 135 U. S., 10 S. Ct. 651, 653."

The First National Bank of Greenville v. Gildart, supra, was not an attempted removal of a tax proceeding but a bill in equity, in the federal District Court, to restrain such proceeding in the circuit court of the state to which it had been appealed by the bank from an order of the board of supervisors approving the assessment in question. The court, assuming general federal jurisdiction, because the suit arose out of a law of the United States, held that there was no equitable jurisdiction because the plaintiff had the remedy at law to pay the tax and sue to recover it. Matthews v. Rodgers, 284 U. S. 521, 52 S. Ct. 217, 76 L. Ed. 447. It is true that, having decided there was no equitable jurisdiction, the court went on to discuss a question of equitable fitness or propriety, and stated that, on appeal to the circuit court, "the assessments had not become final, but were in process of settlement in the Mississippi courts in a proceeding which though partly judicial, was also essentially administrative in character," and concluded: "When administrative proceedings of this character are provided by a state, it is the duty of persons to avail themselves of them before applying to the federal court for relief;" citing Prentis v. Atlantic Coast Line, 211 U. S. 210, 29 S. Ct. 67, 53 L. Ed. 150, and other cases which are distinguished by the Supreme Court in the later case of City Bank Farmers' Trust Co. v. Schnader (Jan. 8, 1934), 291 U. S. 24, 54 S. Ct. 259, 261, 78 L. Ed. 628, wherein the court said:

"Since the Dauphin county court is empowered, upon appeal from the action of the appraiser, to determine all questions, including both valuation and liability for the tax, the contention is made that its function is at least in part administrative, and a suit for injunction may not be entertained by a federal court prior...