City of Houston v. Standard-Triumph Motor Company

Decision Date06 July 1965
Docket NumberNo. 21073.,21073.
Citation347 F.2d 194
PartiesCITY OF HOUSTON and Houston Independent School District, Appellants, v. STANDARD-TRIUMPH MOTOR COMPANY, Inc., Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Homer T. Bouldin, B. F. Richards, John Wildenthal, Jr., City Atty., Homer T. Bouldin, Senior Asst. City Atty., Houston, Tex., for appellants.

Norman W. Black, Burke Holman, Houston, Tex., Holman, Saccomanno, Clegg & Martin, Houston, Tex., of counsel, for appellee.

Before RIVES and JOHN R. BROWN, Circuit Judges, and NOEL, District Judge.

JOHN R. BROWN, Circuit Judge:

The substantive problem presented by this case is whether imported English automobiles are immune from Texas ad valorem taxation under the Import-Export Clause1 of the Constitution. But that question is now secondary for the appeal turns on whether the District Court should have entertained the declaratory judgment suit at all. On that score we hold in the negative, vacate the judgment and remand the case.

The facts may be here severely capsulated since these, together with the legal issues involved, are set forth with clarity in the able opinion of the District Judge. Standard-Triumph Motor Co. v. City of Houston and Houston Ind. School Dist., S.D.Tex., 1963, 220 F.Supp. 732. The suit was filed by the Importer,2 the importer of British Triumph automobiles, many of which are in the popular sports class. The automobiles involved were on T-day3 still the property, and in the physical custody, of Importer. Except for filling of batteries and putting in a small amount of gasoline to facilitate transfer from dock side to Importer's storage area in the city, each of the automobiles was in substantially the same condition as when shipped from England and discharged from the vessel. An automobile seldom remained more than 90 days in pre-sale storage. When and as Importer sold a car to one of its distributor-dealers, it was withdrawn from storage, any marine transportation damage repaired, the automobile cleaned of protective coatings, and certain equipment such as bumpers, hubcaps, wind-screens, and the like installed in place. This procedure took ordinarily not more than three to four hours. It being conceded by stipulation that the automobiles were imported and the Importer was the importer, the controversy raged about whether they were still imports or whether by reason of these activities of Importer, they had ceased to be imports. Quite understandably, the antagonists took as gospel and scripture, good for attack and defense, the celebrated opinion by Chief Justice Marshall in Brown v. The State of Maryland, 1827, 12 Wheat 419, 25 U.S. 419, 6 L.Ed. 678. The taxing authorities, faced with the inescapable fact that the automobiles were imported, not for use by the importer, but for resale by it, stressed heavily the concept articulated in Hooven & Allison Co. v. Evatt, 1945, 324 U.S. 652, 65 S.Ct. 870, 89 L.Ed. 1252, and applied in Youngstown Sheet & Tube Co. v. Bowers, 1958, 358 U.S. 534, 79 S.Ct. 383, 3 L.Ed.2d 490, to sustain state taxation, that the importer "have so acted upon the imported materials as to cause them to lose their distinctive character as `imports' by irrevocably committing them, after their importation journeys have definitely ended,"4 to the use for which they had been imported.

On the facts and stipulations, the District Judge concluded that the automobiles were still imports. In response to the express prayer of the complaint, the Court entered a declaratory judgment decreeing that the "assessment of" the specified automobiles for each of the three years 1961-1962-1963 "was and is an invalid assessment on imports" and "was and is an unconstitutional tax on imports" and therefore "was and is illegal and null and void."5

By this appeal, the taxing authorities make a dual attack which, apart from the intrinsic merits, brings seriously into question for the first time in this litigation the propriety of the Federal Court entertaining the declaratory judgment suit at all. Because we think this first — albeit completely new — ground is decisive, we do not reach the second question concerning the merits.

For the challenge of the propriety of a Federal declaratory suit, the taxing authorities stand squarely on the Johnson Act which, as it now appears in the Judicial Code as revised in 1948, reads as follows:

"The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State Law where a plain, speedy and efficient remedy may be had in the courts of such State."6

To this the Importer makes a triple response. First, the contention comes too late and was effectually waived below. Second, the Johnson Act, whether in prohibitory or jurisdictional terminology, proscribes injunctive, restraining orders only, not declaratory judgments. And third, Texas court remedies are not "plain, speedy and efficient."

As to the first, we think in fact that the taxing authorities acquiesced without objection to the Federal declaratory judgment proceeding. There might, just barely possibly might, be a paper denial.7 But certainly the taxing authorities registered no real opposition. The detailed pretrial order, F.R.Civ.P. 16, made no mention of it as even a remote possible issue and it is not surprising, therefore, that the Judge's opinion is completely silent on the point. The upshot of it is that were the Johnson Act not a restraint upon the Court itself but a mere matter left to the parties, we would readily conclude that there had been a waiver.

A consideration of the second argument — inapplicability of the Johnson Act to declaratory suits — demonstrates two things. First, the policies proscribing injunctive suits forbid declaratory actions as well. And second, this congressional adjustment of comity considerations is not a matter left to private parties to waive or assert as their interests might dictate.

The Supreme Court in Great Lakes Dredge & Dock Co. v. Huffman, 1943, 319 U.S. 293, 63 S.Ct. 1070, 87 L.Ed. 1407, made the answer crystal clear. What was done parallels in importance what was said. Our Court had affirmed, on the merits, a declaratory judgment of the Federal District Court for the Eastern District of Louisiana declaring that a Louisiana unemployment tax was constitutionally applicable to crew members of dredges notwithstanding the uniformity of admiralty concept. Although, on the same day, the Supreme Court sustained the validity of that type of unemployment tax statute,8 the Supreme Court affirmed our judgment "but solely on the ground that, in the appropriate exercise of the court's discretion, relief by way of a declaratory judgment should have been denied without consideration of the merits." 319 U.S. at 301, 63 S.Ct. at 1074. The Court, therefore, just as we are doing here, extinguished altogether the adjudication of the merits even though the judicial travail had been incurred and the offspring was robust and legitimate, that is right.

In taking this strong stand, the Court first emphasized the pre-Johnson Act judicial equitable principles to maintain comity. "This Court," it stated, "has recognized that the federal courts, in the exercise of the sound discretion which has traditionally guided courts of equity in granting or withholding the extraordinary relief which they may afford, will not ordinarily restrain state officers from collecting state taxes where state law affords an adequate remedy to the taxpayer. Matthews v. Rodgers, 284 U.S. 521, 52 S.Ct. 217, 76 L.Ed. 447." 319 U.S. at 297, 63 S.Ct. at 1072.

The Court went on to state that "Congress recognized and gave sanction to this practice of federal equity courts by the" Johnson Act (note 6, supra). This earlier equity practice and, the Court continued, "the confirmation of that practice by Congress, have an important bearing upon the appropriate use of the declaratory judgment procedure by the federal courts as a means of adjudicating the validity of state taxes." 319 U.S. at 299, 63 S.Ct. at 1073.

The Court looked at the problem in practical terms. It recognized that the Johnson Act speaks only in terms of injunction and "that the declaratory judgment procedure may be, and in this case was, used only to procure a determination of the rights * * * without an injunction * * *." At the same time it was aware that the "procedure may in every practical sense operate to suspend collection of the state taxes until the litigation is ended." But the Court found it unnecessary to determine whether the Act itself should be construed "to prohibit a declaration by federal courts concerning the invalidity of a state tax." It was unnecessary, the Court stated, because "we are of the opinion that those considerations which have led federal courts of equity to refuse to enjoin the collection of state taxes, save in exceptional cases, require a like restraint in the use of the declaratory judgment procedure." 319 U.S. at 299, 63 S.Ct. at 1073. After examining the purpose of the Declaratory Judgment Act, 28 U.S. C.A. § 2201, and the discretion to withhold declaratory relief upon equitable principles, the Court then rephrased it this way. "The considerations which persuaded federal courts of equity not to grant relief against an allegedly unlawful state tax, and which led to the enactment of the Johnson Act are persuasive that relief by way of declaratory judgment may likewise be withheld in the sound discretion of the court." 319 U.S. at 300, 63 S.Ct. at 1074. But this general language about discretion is then translated into tangible specific terms: "With due regard for these considerations, it is the court's duty to withhold such relief when, as in the present case, it appears that" the taxpayer has "an adequate remedy" through a state court proceeding in which "he may assert his federal rights and secure a review of them by this Court." 319 U.S. at 300-301, 63 S.Ct. at...

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