Grether v. Wright

• Decision Date: 08 July 1896
• Docket Number: 399.
• Citation: 75 F. 742
• Parties: GRETHER et al. v. WRIGHT et al.
• Court: U.S. Court of Appeals — Sixth Circuit

75 F. 742

GRETHER et al. v. WRIGHT et al.

No. 399.

United States Court of Appeals, Sixth Circuit.

July 8, 1896

The action below was by bill in equity, filed by John R. Wright and Charles Baird, the surviving executors of the last will and testament of Thomas W. Cornell, deceased, to restrain John Grether, auditor of Summit county, Ohio, and Robert L Andrew, treasurer of the same county, from proceeding to collect taxes amounting to $36,405, claimed by the county officers to be due from said estate as taxes, which were assessed by the defendant auditor, or his predecessor in office, against Thomas W. Cornell for the years 1887, 1888 1889, 1890, 1891, and 1892. The assessment was made under section 2781 of the Revised Statutes of Ohio on the ground that said Cornell, a citizen of Ohio, resident in Summit county, had been, during the years mentioned, the owner of $150,000 par value of the bonds of the District of Columbia and had made a false return in respect thereto, or had evaded making a return concerning the same. Section 2781 is as follows:

'Sec 2781. If any person whose duty it is to list property or make (a) return thereof for taxation, either to the assessor or county auditor, shall, in any year or years, make a false return or statement, or shall evade making a return or statement, the county auditor shall, for each year, ascertain, as near as practicable, the true amount of personal property, moneys, credits and investments that such persons ought to have returned or listed for not exceeding (the) five years next prior to the year in which the inquiries and corrections provided for in this and the next section are made; and to the amount so ascertained for each year, he shall add fifty per centum, multiply the sum or sums thus increased by said penalty by the rate of taxation belonging to said year or years, and accordingly enter the same on the tax lists in his office, giving a certificate therefor to the county treasurer, who shall collect the same as other taxes.'

The assessment was made upon the duplicate after the death of Thomas W. Cornell, in September, 1892, but it was in form made under section 2781, as against him personally for the years during which he was alive, and it so appears upon the duplicate. The bill averred that the bonds thus assessed for taxation were bonds of the United States, and expressly exempted by act of congress from all taxation, federal, state, or municipal, and that the assessment was therefore illegal. The bill further averred that the assessment had been made by the auditor without granting a hearing, that the treasurer was about to collect the same by distraint, and that the complainants, the executors of Cornell, under his will, were without adequate remedy at law. The bill was demurred to for want of equity. The demurrer was overruled, and the defendants then filed separate answers, in which answers the exemption from taxation of the bonds assessed was denied, the want of notice was denied, and the intention of the treasurer to distrain or to assert his right to collect the taxes assessed in any other way than by ordinary suit at law was denied. The complainants then filed what is called in the record a 'demurrer to the answers,' seeking thereby to raise the question of the sufficiency of the facts stated in the answers to defeat the relief prayed in the bill. The form of pleading was not objected to. The court passed upon the sufficiency of the answers, and held that they were insufficient, and entered a decree perpetually enjoining the collection of the tax, on the ground of its illegality.

W. W. Boynton and William L. Avery (Rant & Sieber and Boynton & Horr, of counsel), for appellants.

Charles Baird (Wm. H. Upson, of counsel), for appellees.

Before TAFT and LURTON, Circuit Judges, and HAMMOND, J.

TAFT Circuit Judge, after stating the facts as above, .

A demurrer to an answer is unknown in the equity practice of the federal courts, as it was unknown to the practice of the high court of chancery in England. Crouch v. Kerr, 38 F. 549; Banks v. Manchester, 128 U.S. 244, 9 Sup.Ct. 36; Travers v. Ross, 14 N.J.Eq. 254, 258; Winter v. Claitor, 54 Miss. 341; Edwards v. Drake, 15 Fla. 666; 1 Daniell, Ch.Prac. 542. The only way by which the sufficiency of an answer to the bill in equity can be tested is by setting the case down for hearing upon bill and answer, the effect of which is an admission by the complainant of all the averments of fact properly pleaded in the answer and a waiver of any right to contest them by replication and proof. Barry v. Abbot, 100 Mass. 396; Brown v. Mortgage Co., 110 Ill. 235; Stone v. Moore, 26 Ill. 165. If, therefore, any objection had been taken to the demurrer filed to the answer, it must have been stricken from the files, but as no objection was taken in the court below, and, as no objection is made on the hearing in this court to the form of the proceeding, we shall treat the demurrer filed by the complainant as an application to the court to set down the case upon bill and answer, and consider the decree as if it had been entered upon such hearing. Barry v. Abbot, 100 Mass. 396.

The first ground for reversing the decree of the court below pressed upon us is that the bill did not state a case of equitable jurisdiction. In order to make this contention clear, counsel for the appellant has gone into an elaborate argument to show that the only course permitted by law to the county treasurer in the collection of this tax against the executor would be by an ordinary suit for the collection, and that under the law in such a case he would have no power to distrain. Whether he would have such power or not we do not regard as material, because the answer of the treasurer, which must be taken as true, avers that he has no intention of distraining, and will take no other method of collecting the tax than by suit against the executors. Section 2859 of the Revised Statutes of Ohio certainly gives the remedy to the treasurer by civil action, in which the defendant could make defense at law and have a trial by jury. Therefore, unless the complainants below were entitled to file a bill to restrain the tax on the sole ground of its illegality, we think that the decree should have dismissed the bill without prejudice on the ground that there was no equitable jurisdiction.

Chapter 13 of title 1 of division 7 of the Revised Statutes of Ohio is entitled 'Taxes and Assessments-- Relief against Illegal,' and contains four sections, which are as follows:

'Sec. 5848. Courts of common pleas and superior courts shall have jurisdiction to enjoin the illegal levy of taxes and assessments, or the collection of either, and of actions to recover back such taxes or assessments as have been collected, without regard to the amount thereof, but no recovery shall be had unless the action be brought within one year after the taxes or assessments are collected.

'Sec. 5849. Actions to enjoin the illegal levy of taxes and assessments must be brought against the corporation or person for whom use and benefit the levy is made; and if the levy would go upon the county duplicate the county auditor must be joined in the action.

'Sec. 5850. Actions to enjoin the collection of taxes and assessments must be brought against the officer whose duty it is to collect the same; actions to recover back taxes and assessments must be brought against the officer who made the collection, or if he is dead, against his personal representative; and when they were not collected on the county duplicate, the corporation which made the levy must be joined in the action.

'Sec. 5851. If the plaintiff in an action to enjoin the collection of taxes or assessments admit a part thereof to have been legally levied, he must first pay or tender the sum admitted to be due; if an order of injunction be allowed, an undertaking must be given as in other cases; and the injunction shall be a justification of the officer charged with the collection of such taxes or assessments for not collecting the same.'

It was in reliance on these sections that the court below held that the appellees or complainants below were entitled to file a bill in equity to enjoin the taxes solely on the ground of their illegality. The court followed the case of Cummings v. Bank, reported in 101 U.S. 153. That was a suit by a national bank to enjoin the levy and collection of a tax on the ground that the officers charged with the execution of the tax laws of Ohio unjustly discriminated against the bank and its stockholders in their assessment of value upon national bank stock as compared with that placed by them on other property. The question was raised in that case whether there was not an adequate remedy at law which prevented relief in equity. As the case and its decision has been made the subject of much discussion, we think it proper to quote in full the language of Mr. Justice Miller in considering this objection:

'It is next suggested that, since there is a plain, adequate, and complete remedy by paying the money under protest and suing at law to recover it back, there can be no equitable jurisdiction of the case. The reply to that is that the bank is not in a condition where the remedy is adequate. In paying the money it is acting in a fiduciary capacity as the agent of the stockholders, an agency created by the statute of the state. If it pays an unlawful tax assessed against its stockholders, they may resist the right of the bank to collect it from them. The bank, as a corporation, is not liable for the tax, and occupies the position of stakeholder, on whom the cost and trouble of the litigation should not fall. If it pays, it may be subjected to a separate suit by each shareholder. If it refuses, it must

...