Harsh California Corp. v. County of San Bernardino, 15991.

• Decision Date: 29 December 1958
• Docket Number: No. 15991.,15991.
• Citation: 262 F.2d 626
• Parties: HARSH CALIFORNIA CORPORATION, a corporation, Appellant, v. COUNTY OF SAN BERNARDINO, Cal., a body corporate and politic, S. Wesley Break, Daniel Mikesell, Magda Lawson, Paul Young, and Nancy Smith, as members of and constituting the Board of Supervisors of the County of San Bernardino, and Albert E. Weller, County Counsel of the County of San Bernardino, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

262 F.2d 626 (1958)

HARSH CALIFORNIA CORPORATION, a corporation, Appellant, v. COUNTY OF SAN BERNARDINO, Cal., a body corporate and politic, S. Wesley Break, Daniel Mikesell, Magda Lawson, Paul Young, and Nancy Smith, as members of and constituting the Board of Supervisors of the County of San Bernardino, and Albert E. Weller, County Counsel of the County of San Bernardino, Appellees.

No. 15991.

United States Court of Appeals Ninth Circuit.

December 29, 1958.

Holbrook, Tarr & O'Neil, W. Sumner Holbrook, Jr., Francis H. O'Neill, Jr., Los Angeles, Cal., for appellant.

Albert E. Weller, County Counsel, J. B. Lawrence, Deputy County Counsel, San Bernardino County, Cal., for appellees.

Before BARNES, HAMLEY, and HAMLIN, Circuit Judges.

HAMLEY, Circuit Judge.

Harsh California Corporation brought this action against the County of San Bernardino and certain of its public officers to obtain a declaratory judgment and an injunction. Plaintiff sought a declaration that property taxes assessed and levied against the corporation in the amount of $21,388 had been offset under provisions of the National Housing Act, as amended, 12 U.S.C.A. § 1701 et seq., and were therefore not due. The court was also asked to enjoin defendants from doing anything to enforce the tax and to order the named public officers to cancel the tax and assessment.

A temporary restraining order and an order to show cause were issued. Defendants then moved to dismiss the action upon the ground that the complaint failed to state a claim upon which relief could be granted. Specific reference was made in this motion to 28 U.S.C.A. § 1341 (Johnson Act), which forbids district courts to enjoin, suspend, or restrain the assessment, levy, or collection of state taxes "where a plain, speedy and efficient remedy may be had in the courts of such State."

After hearings on the order to show cause and the motion to dismiss, the trial court entered an order dissolving the temporary restraining order, discharging the order to show cause, and dismissing the action. It was held that the corporation had a plain, speedy, and efficient state remedy, and that therefore, under 28 U.S.C.A. § 1341, relief could not be obtained in federal court. Plaintiff appeals.

The facts are not in dispute. The corporation is lessee of tax-exempt land and improvements owned by the United States. This land is located at Barstow Marine Corps Supply Center, Barstow, California. The Barstow Supply Center includes a military housing project for officers, enlisted men, and necessary civilian personnel. The lease and construction of improvements were made pursuant to the provisions of 12 U.S.C.A. § 1748 et seq.

Appellee county assessed the corporation's possessory interest in this government property at $427,760 for 1957-58. Taxes were then levied against the leasehold in the sum of $21,388. On August 1, 1957, G. Leon Gregory, as county tax collector, demanded payment of the latter amount on or before August 31, 1957, under threat of seizure and sale of the government lease.

Under California law, the corporation's leasehold in this government property is taxable. However, under a 1956 amendment to the Housing Amendments of 1955, it is provided that no taxes or assessments (with an exception not here relevant) on the interest of such a government lessee shall exceed the amount of taxes or assessments on other similar property of similar value, less an amount determined in the manner specified in the amendatory statute.¹ Pursuant to this 1956 enactment, Captain A. D. Hunter, as designee of the Secretary of Defense, proceeded to determine the amount to be so deducted, arriving at a figure of $27,759.

Captain Hunter's determination was transmitted to the board of supervisors of appellee county on August 13, 1957. Two days later the corporation made demand upon the board "to give full recognition" to the determination of Captain Hunter. The board was informed by letter that such determination "eliminates the tax against the Barstow Wherry Project for the fiscal year July 1, 1957 to June 30, 1958." Alleging that the county and its officers thereafter failed and refused to cancel the assessment and tax in question "as being erroneous, illegal or void," the corporation then began this action.

On this appeal the corporation contends that it does not have a plain, speedy, and efficient remedy in the courts of California. This being so, appellant argues, the Johnson Act, 28 U.S.C.A., § 1341, does not stand in the way of granting injunctive relief. In this connection appellant cites Hillsborough Township, Somerset County, N. J. v. Cromwell, 326 U.S. 620, 66 S.Ct. 445, 90 L.Ed. 358, for the proposition that to negate the application of the Johnson Act it is sufficient to show that there is "uncertainty" surrounding the adequacy of the state remedy.²

In order to show that there is no adequate state remedy, or to show that there is at least uncertainty as to the adequacy of such a remedy, appellant has undertaken to survey the California statutes which might possibly afford a remedy. The first such possible remedy which is discussed is that of asserting the claimed total deduction by means of a counterclaim or cross-complaint in a suit brought by the county under West's Ann. Revenue and Taxation Code, § 3003, for the recovery of delinquent taxes or assessments.

As appellant has correctly stated, the State of California or one of its political subdivisions cannot be sued directly, or indirectly as by setting up a counterclaim, cross-complaint, or setoff, except when this is permitted expressly by statute.³ We will assume that there is no California consent statute which would permit a taxpayer to file a counterclaim or a cross-complaint in a suit brought by the county under West's Ann. Revenue and Taxation Code, § 3003.

In our view, however, a taxpayer's resistance to such a suit, based upon a determination such as was here made by Captain Hunter, would not be asserted by way of counterclaim or cross-complaint. The corporation has no claim against the county, but asserts only that it is entitled to a deduction which was disallowed by the county. In effect, it is contended that the county seeks money beyond that to which it is entitled. Such a contention is in the nature of an affirmative defense and presents no sovereign-immunity problem.

The cases cited by appellant do not support a contrary view. In Sunset Oil Co. v. State of California, supra, principally relied upon, the party standing in the place of the taxpayer sought to defend against a claim for unpaid taxes by asserting that taxes incurred in a wholly unrelated transaction had been erroneously assessed and collected. This court correctly identified the defendant's position as that of a counterclaimant or cross-complainant. Effect was therefore properly given to the doctrine of sovereign immunity.

In the instant case, however, Captain Hunter's determination pertaining to a particular government leasehold has relevance only with regard to the tax assessed and levied against the same leasehold. Moreover, such determination has no office to serve other than as a deduction from such tax and hence a defense to a suit thereon. It does not, as appellant argues, involve the assertion of a "credit," for a "credit" may be independently asserted and this deduction may not. It follows that the case now before us is not affected by the decision in Sunset Oil Co. v. State of California.

Himmelmann v. Spanagel, 1870, 39 Cal. 389, cited by appellant, was an action brought on behalf of a municipality to recover an unpaid assessment for street improvements. Some of the defendants sought to counterclaim for damages sustained when the contractor who performed street grading for which the assessment was imposed deposited earth on defendants' property. It was held that for a variety of reasons, including the doctrine of sovereign immunity, the defendants were not entitled to assert such a counterclaim.

A true counterclaim was involved in Himmelmann — a claim which, but for the doctrine of sovereign immunity, could have been advanced in an independent suit as a basis for a monetary recovery. This would not have been possible with regard to the deduction defense which appellant corporation here seeks to assert against the county.

Prescott v. McNamara, 73 Cal. 236, 14 P. 877, also cited by appellant, is wholly irrelevant. It did not involve a cross-complaint, counterclaim, or a defense of any nature.

We are aware of the fact that the county is not required to resort to a court action to recover the tax in question, and that unless it does so, no defense remedy of the kind we have been discussing may be asserted.

Under West's Ann.Revenue and Taxation Code, § 2914, taxes...