Horn v. O'Cheskey

• Decision Date: 16 July 1974
• Docket Number: No. 74-326 Civil.,74-326 Civil.
• Citation: 378 F. Supp. 1280
• Parties: H. D. HORN, a general partner of the limited partnership of Nugent-Horn-Morris, Plaintiff, v. Fred O'CHESKEY, Commissioner of Revenue, State of New Mexico, et al., Defendants.
• Court: U.S. District Court — District of New Mexico

378 F. Supp. 1280

H. D. HORN, a general partner of the limited partnership of Nugent-Horn-Morris, Plaintiff, v. Fred O'CHESKEY, Commissioner of Revenue, State of New Mexico, et al., Defendants.

No. 74-326 Civil.

United States District Court, D. New Mexico.

July 16, 1974.

Crouch, Parr & Herring (J. R. Crouch), Las Cruces, N. M., for plaintiff.

Jan E. Unna, Bureau of Revenue, Santa Fe, N. M., for defendants.

MEMORANDUM OPINION

BRATTON, District Judge.

This action contests the constitutionality of § 72-13-72 N.M.S.A. (1973 Supp.) of the Tax Administration Act authorizing "jeopardy assessments" and an administrative procedure for their collection. The complaint requests damages and a temporary restraining order enjoining the enforcement of § 72-13-72 and enjoining the defendants, Fred O'Cheskey, Commissioner of Revenue of the State of New Mexico, and his agents from proceeding thereunder and levying upon plaintiff's property. Jurisdiction has been asserted under 28 U.S.C.A. §§ 1331, 1332, and 1343(3). Upon the inquiry of the Court during the hearing on the motion, plaintiff requested the convening of a three-judge court pursuant to the statutory procedure outlined in 28 U.S.C.A. §§ 2281 and 2284.

Plaintiff H. D. Horn, a Texas resident, and a general partner of the limited partnership of Nugent-Horn-Morris (hereinafter NHM), a Texas partnership, holds an interest in an apartment complex known as Villa Sierra Apartments in Las Cruces, New Mexico. NHM, the owner of the complex, has executed a mortgage agreement with the Federal Housing Administration, Department of Housing and Urban Development, whereby the partnership encumbered the property and assigned all rents to the FHA. This agreement was duly recorded in the office of the County Clerk, Dona Ana County, on October 29, 1973. Thereafter on June 14, 1974, the Bureau of Revenue notified the plaintiff that a jeopardy tax assessment¹ had been placed on the property and on June 24, agents of the Bureau served warrants of levy upon approximately 75 tenants of the apartment complex, ordering them to pay all rents due or to become due to the Bureau of Revenue. The Bureau subsequently recorded a tax lien on the property on June 25.

Horn concentrates his constitutional attack upon the statute's provisions establishing the procedure which a taxpayer must follow to contest his tax liability.² Specifically he challenges its provisions requiring a disaffected taxpayer to either pay the amount demanded or post adequate security therefor within 5 days of the notice of jeopardy assessment as a prerequisite to his ability to debate his liability through the administrative hearing procedures specified in §§ 72-13-38 to 72-13-40 N.M.S. A. (1973 Supp.). Plaintiff contends that this procedure deprives him of his property without due process of law since it requires him to either pay the tax or post security therefor prior to any hearing to determine the validity of his challenges, in contravention of the doctrine enunciated in Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed. 2d 556 (1972), and most recently in Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974). Petitioner argues that the procedure to which he is relegated is exceptionally onerous on the facts of this case where the contested tax liability exceeds $100,000.

In any case in which a request has been made for the convocation of a three-judge court, the district judge to whom the petition has been addressed, possesses the authority to initially examine the jurisdictional bases of the complaint and its substantiality on the merits, without first convening a judicial triumvirate. Ex Parte Poresky, 290 U. S. 30, 54 S.Ct. 3, 78 L.Ed. 152 (1933); Long v. District of Columbia, 152 U.S. App.D.C. 187, 469 F.2d 927 (1972); Puglia v. Cotter, 333 F.Supp. 940 (D.Conn.1971). The single district judge is also empowered to dismiss the complaint if, after a review of the case, he determines that jurisdiction does not exist or that the complaint fails to state a substantial constitutional claim. Ex Parte Poresky, Long, and Puglia, supra. This fact is so despite the seemingly contradictory mandate of 28 U.S.C.A. § 2284(5) which precludes dismissal of a complaint by a single judge, since that statute governs procedure only after a three-judge court has initially been convened. See Jacobs v. Tawes, 250 F.2d 611 (4th Cir. 1957); Lion Manufacturing Corporation v. Kennedy, 117 U.S.App.D.C. 367, 330 F.2d 833 (1964). Review of such a determination lies in the appropriate Court of Appeals. Idlewild Bon Voyage Liquor Corp. v. Epstein, 370 U.S. 713, 82 S.Ct. 1294, 8 L.Ed.2d 794 (1962).

However, dismissal of the complaint by a single judge upon jurisdictional grounds will be proper only where the jurisdictional bases asserted are insubstantial. See Jacobs v. Tawes, supra; Maryland Citizens For a Representative General Assembly v. Governor of Maryland, 429 F.2d 606 (4th Cir. 1970); Cherry v. Postmaster General, 272 F.Supp. 982 (D.Puerto Rico 1967). Such a conclusion follows since the parallel determination that a complaint fails to state a substantial constitutional question, although a determination on the merits, is essentially a statement that subject matter jurisdiction does not exist. See Ex Parte Poresky, supra.

The defendants urge the Court to dismiss the action, relying upon the explicit proviso of 28 U.S.C.A. § 1341 which reads:

"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."

Defendants contend that the relief demanded by the plaintiff would precipitate a head-on collision with this statutory directive since the levy and collection procedures outlined in § 72-13-72 would be effectively forestalled and a fortiori, the State Treasury deprived of expected revenues. After an analysis of the cases involving § 1341 and the unequivocal language of the statute itself, the Court is convinced that the statute means exactly what it says and mandates a denial of the equitable relief requested for want of jurisdiction in the court.

The evolution of the doctrine of judicial noninterference with the administration of a state's fiscal operations preceded its codification in § 1341. The philosophical undercurrents of the principle are grounded in a recognition of a fundamental truth that the effective operation of the state government, indeed any government, depends directly upon the presence of sufficient revenues to fund governmental programs. The continuity of state governmental initiatives is often delicately linked to the assurance that the necessary revenues will be available at a precise moment. Also underlying the doctrine is the recognition that a state's taxing scheme often involves highly complex administrative procedures intertwined in the linguistic peculiarities of state statutes quite familiar to the state administrators who constantly apply them, but similarly foreign to federal courts who apply them on an intermittent ad hoc basis. See Perez v. Ledesma, 401 U.S. 82, 126-129, 91 S.Ct. 674, 27 L.Ed.2d 701 (1971) (Brennan, J., concurring in part and dissenting in part.) It does not require clairvoyance to foresee the problems that would most certainly arise from repeated federal intervention in the state's fiscal operations.

Five years prior to the enactment of § 1341, the Supreme Court graphically explained the rationale for the reluctance of federal courts to employ their equitable powers in a state tax dispute, observing in the case of Matthews v. Rodgers, 284 U.S. 521, 525-526, 52 S.Ct. 217, 219, 76 L.Ed. 447 (1932):

"The reason for this guiding principle is of peculiar force in cases where the suit, like the present one, is brought to enjoin the collection of a state tax in courts of a different, though paramount, sovereignty. The scrupulous regard for the rightful independence of state governments which should at all times actuate the federal courts, and a proper reluctance to interfere by injunction with their fiscal operations, require that such relief should be denied in every case where the asserted federal right may be preserved without it. Whenever the question has been presented, this Court has uniformly held that the mere illegality or unconstitutionality of a state or municipal tax is not in itself a ground for equitable relief in the courts of the United States. If the remedy at law is plain, adequate, and complete, the aggrieved party is left to that remedy in the state courts, from which the cause may be brought to this Court for review if any federal question be involved * * *" (Emphasis added)

See also Great Lakes v. Huffman, 319 U.S. 293, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943).

The determinative question to be resolved in any case where federal equitable intervention is sought in a state tax dispute and the key to the interpretation of § 1341 is whether a "plain, speedy, and efficient" remedy exists in the courts of the state. See Ford Motor Credit Company v. Louisiana Tax Commission, 440 F.2d 675 (5th Cir. 1971); Great Lakes Co. v. Huffman, supra. The fact that the complaint raises federal constitutional questions concerning the challenged state statute is of no significance in making a jurisdictional determination under § 1341. The state courts have concurrent jurisdiction of claims involving federal constitutional rights and § 1341 requires that one protesting the constitutionality of a state tax statute assert his federal rights in the state forum. The Tenth Circuit set forth the applicable law in the case of Baker v. Atchison, T. & S.F. Ry. Co., 106 F.2d 525, 529-530 (1939) by stating:

"But another principle of equity is equally well founded and has peculiar application in a case of this kind. It is that the federal courts

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