In re Missouri Pac. R. Co.

• Decision Date: 05 July 1940
• Citation: 33 F. Supp. 728
• Parties: In re MISSOURI PAC. R. CO.
• Court: U.S. District Court — Eastern District of Missouri

33 F. Supp. 728

In re MISSOURI PAC. R. CO.

District Court, E. D. Missouri, E. D.

July 5, 1940.

Hill, Fitzhugh & Brizzolara and Jos. M. Hill, Sp. Counsel, all of Fort Smith, Ark., and Jack Holt, Atty. Gen., for Arkansas, and Leffel Gentry, Asst. Atty. Gen., for Arkansas, for Arkansas Corporation Commission.

J. M. Chaney, of St. Louis, Mo., for Missouri Pac. R. Co.

MOORE, District Judge.

This matter is now before the Court on a motion filed by the State of Arkansas to dismiss, on certain jurisdictional grounds as hereafter more fully stated, a petition filed by Guy A. Thompson, trustee, asking this Court to hear and determine the amount and validity of taxes assessed against the railroad properties of the trustee in the State of Arkansas for the year 1938.

The petition as filed by the trustee, on April 12, 1939, prayed for authority to pay or tender taxes to the collectors of the several counties in said State, due in the year 1939, in the aggregate sum of $622,092.88. As to the excess over that amount, or $414,728.54, making up the total tax of $1,036,821.42 resulting from the assessed value of $28,114,960, set by the Arkansas Corporation Commission upon the trustee's railroad properties in Arkansas for the year 1938 (upon which the taxes payable in 1939 are based), the petition prays that this Court hear and determine the amount and validity thereof.

The petition alleges that said assessed value of $28,114,960, as set by the Arkansas Corporation Commission, is discriminatory, in violation of Section 5, of Article XVI of the Constitution of Arkansas; greatly in excess of the fair market value of said properties, which the Arkansas statute provides shall be the basis for assessment, and would impose upon the trustee so undue and disproportionate a share of the taxes in Arkansas as to deprive the trustee of his property without due process of law, in violation of the Fourteenth Amendment of the Constitution of the United States.

Guy A. Thompson is the duly appointed, qualified and acting trustee for the Missouri Pacific Railroad Company, following the adjudication of said Company, by this Court, as a debtor, under the provisions of Section 77 of the amended Bankruptcy Act, 11 U.S.C.A. § 205, on March 30, 1933.

The trustee appeals to this Court to hear and determine the amount and validity of the disputed tax, in accordance with the provisions of Section 64, sub. a, of the Bankruptcy Act, 11 U.S.C.A. § 104, sub. a Following the filing of said petition, and upon the return day thereof (May 19, 1939) the State of Arkansas and the Corporation Commission, together with the several interested counties, appeared by the Attorney General for the State and filed response to the trustee's petition, together with motion to dismiss said petition.

The State's motion to dismiss was not pressed at that time and the matter was, on said May 19, 1939, by this Court referred to Marion C. Early, Special Master, for report as to the facts in connection with said matter and findings of law thereon.

No report has thus far been filed by the Special Master.

While the matter was pending before the Special Master, on March 13, 1940, this motion to dismiss was filed by the State. Said motion was thereafter argued orally and briefs thereon filed by counsel for the State and for the trustee.

The motion to dismiss is based upon the following grounds:

1st. That the order authorizing the trustee to pay a certain part of the taxes, resulting from the assessment made by the Arkansas Corporation Commission and to withhold the balance pending the determination by this Court of the amount and validity of the disputed tax, is in violation of Section 24(1) of the Judicial Code, as amended by the Act of May 14, 1934, 48 Stat. 775, 28 U.S.C.A. § 41(1), which deprives United States District Courts of jurisdiction to enjoin, suspend or restrain the enforcement of any order of an administrative board or commission of a State, where jurisdiction is based solely upon the ground of diversity of citizenship or the repugnance of such order to the Constitution of the United States.

In the opinion of the Court this proceeding is not subject to the prohibition of Section 24 of the Judicial Code. This is not an injunction suit, nor is jurisdiction based solely upon diversity of citizenship or repugnance of the Commission's assessment to the Constitution of the United States. The trustee invokes the jurisdiction of this Court to hear and determine the amount and validity of the disputed tax under the provisions of Section 64, sub. a, of the Bankruptcy Act. It is true that the petition alleged that the assessment is in violation of the 14th Amendment to the Constitution of the United States, but it also alleges that said assessment is in violation of the Constitution and of the Statutes of the State of Arkansas.

The Court is of the opinion that this ground of the State's motion to dismiss is without merit.

2nd. The second ground upon which the State relies in its motion to dismiss is that this Court is deprived of jurisdiction by the 1937 amendment to Section 24(1) of the Judicial Code, Act Aug. 21, 1937, 50 Stat. page 738, 28 U. S.C.A. § 41(1), that: "Notwithstanding the foregoing provisions of this paragraph, no district court shall have jurisdiction of any suit to enjoin, suspend, or restrain the assessment, levy, or collection of any tax imposed by or pursuant to the laws of any State where a plain, speedy, and efficient remedy may be had at law or in equity in the courts of such State."

As has already been remarked, this is not an injunction suit, and, furthermore, the right of appeal to the State Courts does not afford an adequate remedy in such a case as is here presented.

This precise question was passed on by the Circuit Court of Appeals for this Circuit in Board of Directors of St. Francis Levee District v. Kurn, 8 Cir., 98 F. 2d 394, which involved the validity of certain Arkansas levee district taxes asserted against the trustee of a railroad under reorganization. It was therein held the Act of August 21, 1937, did not deprive the Bankruptcy Court of jurisdiction to hear and determine the amount and validity of the disputed tax under the provision of Section 64, sub. a of the Bankruptcy Act. Certiorari was denied in the case last cited, by the Supreme Court, 305 U.S. 647, 59 S.Ct. 153, 83 L. Ed. 418.

In brief filed by the State in connection with its motion to dismiss effort is made to escape the force of the Court of Appeals decision in this St. Francis Levee District case upon the ground that the claims of the Levee District, involved in that case, were not "taxes". It will be observed, however, that throughout...