General Contract Corporation v. Bailey
| Decision Date | 26 October 1953 |
| Docket Number | No. 39049,39049 |
| Parties | GENERAL CONTRACT CORP. et al. v. BAILEY. |
| Court | Mississippi Supreme Court |
Harold Cox, Jackson, for appellants.
Pyles & Tucker, Jackson, for appellee.
This is another suit involving a claim for a municipal privilege tax and penalty upon persons doing a money- lending business where a greater rate of interest than 15 per cent per annum is charged, alleging that appellants, defendants below, are so liable. However, this appeal involves a number of other incidental questions.
Appellee, Mrs. Thomas L. Bailey, State Tax Collector, filed a bill of complaint in the Chancery Court of the First Judicial District of Hinds County against General Contract Corporation (sometimes hereinafter referred to as GCC), appellant, and five attachment defendants, who were claimed to owe money to GCC. The suit was brought by appellee in her official capacity as an officer of the State of Mississippi and for and on behalf of the City of Jackson. The bill charged that GCC, a Missouri corporation, acting by itself and through corporate subsidiaries, for four years since January 1, 1949, had been making loans of money in the City of Jackson at a greater rate of interest than 15 per cent per annum; that GCC and its subsidiaries were in effect one and the same concern, and that GCC and its subsidiary corporation, General Contract Purchase Corporation (sometimes hereinafter referred to as GCPC) had pretended to be loan brokers but were in fact lending money at an interest rate in excess of 15 percent per annum. The bill sought to recover municipal privilege taxes for the City of Jackson for four years from January 1, 1949, to January 1, 1953, under the provisions of Section 132 of the Local Privilege Tax Act of 1944, Miss.Laws 1944, Chapter 137, being Miss.Code 1942, Section 9696-135. That municipal tax is as follows:
'Money lenders who charge more than fifteen per cent.--Upon each person doing a money lending business where a greater rate of interest than fifteen per cent (15%) per annum is charged, whether the loan is secured or unsecured, or whether by taking bills, of sale, absolute or conditional $2,000.00.'
Code of 1942, Section 9696-206 imposes a penalty of 50 percent for failure to pay the tax prior to commencing business. Hence the bill asked for a judgment for $12,000 in delinquent taxes and penalties plus interest. The final decree on March 31, 1953, held for appellee-complainant.
On September 3, 1952, appellant GCC filed a petition in the U. S. District Court, Southern District of Mississippi, Jackson Division, for removal of this cause on the grounds of diversity of citizenship between the City of Jackson and appellant. After removal and before a remand, the District Court discharged the attachment defendants upon GCC making a bond in the amount sued for. On October 2, 1952, the Federal District Court remanded the case back to the Chancery Court. Appellants first contend that the District Court erred in remanding the cause; that the City is the real party in interest as complainant, which gives diverse citizenship; that the District Court is vested with exclusive jurisdiction by reason of the removal, and that the State court lacked any jurisdiction upon the improper remand to it. Appellants rely upon Montgomery & Atlanta Motor Freight Lines, Inc., v. Morris, 1942, 193 Miss. 211, 7 So.2d 826, 8 So.2d 502 to support their argument that this Court, if it found error in the order of remand, could remand the case to the Chancery Court for removal again to the Federal District Court. There is doubt as to whether such a power exists under the present federal judicial code. 1 Barron & Holtzoff, Federal Practice and Procedure (1950) Sec. 109, Supp.; 28 U.S.C.A. Sec. 1447(c); 45 Am.Jur., Removal of Causes, Secs. 196, 204, 226.
However, we do not pass upon that question, since, assuming the existence of that power, we do not think that the requisite diversity of citizenship existed for such removal. A state cannot be a citizen of any state, and accordingly a suit between a state and citizens of different states cannot be removed from a state to a federal court on the ground of diverse citizenship. 45 Am.Jur., Removal of Causes, Sec. 58. Appellants say that the State is only a nominal party in interest and that the only real party in interest to this suit is the City of Jackson, which if true would result in the requisite diversity of citizenship. But that position fails to take account of several important factors. A portion of the delinquent taxes collected will go to the State Treasury, and to help pay for certain essential governmental functions of the State. Code 1942, Section 9192, provides that the salary of the State Tax Collector, $5,000 per annum, shall be paid out of funds collected by him; that the Collector shall pay the expenses incident to his office, including all attorneys' fees, bookkeeper, clerk and secretarial hire, and all his deputies, out of the funds collected, but the total amount paid out for such purposes shall not exceed 20 percent of the total amount collected by his office. The State Tax Collector 'shall retain twenty percentum (20%) of all amounts collected and paid over by him,' and out of that twenty percent he must pay the salaries and expenses of his office and 'the residue shall be covered into the state treasury to the credit of the general fund.' Code Section 9195 provides that the Collector shall not deduct any fees from funds collected from the state or a subdivision, but that exception is not applicable here. Under Code Section 9696-206 the Collector is given the power to collect the instant tax. Accordingly this suit by the Collector is in fact a suit for the benefit of the State as well as of the City, and with the State as a real party in interest.
In Robertson v. Jordan River Lbr. Co. (Robertson v. Wolf River Lbr. Co.) 5 Cir., 1921, 269 F. 606, the state revenue agent of Mississippi filed suits against two lumber companies seeking to remove clouds on certain sixteenth section school lands. The state sued as trustee for the use and benefit of the inhabitants of the township. It was held that the state as the holder of the legal title of these lands in trust for a class of beneficiaries was not a mere nominal party, but a real party in interest. In State of Indiana to Use of Delaware County v. Alleghany Oil Co., C.C.Ind.1898, 85 F. 870, the state sued for the statutory penalty for defendant's violation of the oil and gas conservation statutes. An Indiana statute provided that the penalty when collected shall be paid to the county, but the court held that there was no diverse citizenship, since the state was a real party in interest, seeking to enforce an important governmental policy of conservation of natural resources. The county under the statute was only the beneficiary of the state's bounty which could be withdrawn at any time. See also Southern Ry. Co. v. State, 1905, 165 Ind. 613, 75 N.E. 272; Annotation, 147 A.L.R. 794.
In the present action the state through its officer is seeking to enforce an important governmental policy, its interest in the state's revenue system, and in taxing and penalizing those charging an excessive rate of interest. This fact, although not controlling here, is an important consideration. And under the quoted statutes the state has a substantial interest in the proceeds of any taxes collected. Hence the chancery court had jurisdiction.
Appellants further contend that the trial court erred in admitting into evidence the ordinance of the City of Jackson of August 1, 1946. The statute in effect at that time provided that 'the governing body of the municipality may, by general ordinance, or by resolution, adopt this privilege tax code, and the approval of such ordinance or resolution shall constitute the privilege tax code of the county or municipality, such general ordinance or resolution must tax all privileges set forth in this act, but may prescribe any percentage of the entire code herein set forth from one hundred per cent (100%) or less, to be levied and collected in such counties or municipality.' Miss.Laws 1944, Chapter 137, Section 231, [218 Miss. 497] page 223. Miss.Laws 1952, Chapter 419, Sec. 1, has since made the local taxes mandatory.
The 1946 ordinance stated in part: 'That on each privilege exercised within this city for which a municipal privilege license tax is authorized by the laws of the State of Mississippi, the City of Jackson hereby levies a privilege license tax on each such privilege in the maximum amount authorized by the laws of the State of Mississippi.' The balance of the ordinance provided for the issuance of yearly licenses, the method of payment, method of collection, and exemptions. Appellants say that this ordinance is ineffective to adopt the Local Privilege Tax Act of 1944, Chapter 137, Miss.Laws 1944, because it does not expressly refer to Chapter 137; that the statutory method of adoption by a municipality of such privilege taxes must be strictly followed; and that the ordinance contains nothing which would lead the average taxpayer to the 1944 laws and an identification of these privilege taxes. However, the statute required adoption of local privilege taxes by a 'general ordinance or by resolution', and the ordinance in question expressly adopts and levies all municipal privilege taxes 'authorized by the laws of the State of Mississippi'. That is sufficient.
The privilege taxes recovered include those from January 1, 1949, to January 1, 1953, four years. General Contract Purchase Corporation engaged in the alleged brokerage business in Mississippi from January 1, 1949 to March 31, 1952. From January 1, 1949, to November 21, 1950, approximately 99 percent of the stock of the GCPC was owned by Industrial Bancshares Corporation, and on the latter date Industrial Bancshares Corporation, a Missouri Corporation,...
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