Interstate Natural Gas Co. v. Gully

• Decision Date: 10 October 1933
• Docket Number: No. 447.,447.
• Citation: 4 F. Supp. 697
• Parties: INTERSTATE NATURAL GAS CO., Inc., v. GULLY, State Tax Collector, et al.
• Court: U.S. District Court — Southern District of Mississippi

4 F. Supp. 697

INTERSTATE NATURAL GAS CO., Inc., v. GULLY, State Tax Collector, et al.

No. 447.

District Court, S. D. Mississippi, Jackson Division.

October 10, 1933.

David C. Bramlette, of Woodville, Miss., for plaintiff.

Walter Sillers, Jr., of Rosedale, Miss., Edward W. Smith, of Clarksdale, Miss., W. E. Gore, of Jackson, Miss., and J. A. Lauderdale, Asst. Atty. Gen., for defendants.

Before FOSTER, Circuit Judge, HOLMES and COX, District Judges.

HOLMES, District Judge.

The plaintiff seeks to enjoin the state's administrative officers from assessing its real and personal property for ad valorem taxes for the years 1927 to 1931, inclusive. It alleges a contractual right or grant of exemption of its conduit and pipe lines, pumping plants, and other property used by it in the transportation and distribution of natural gas.

This court has general jurisdiction (a) because the controversy, which is of the requisite amount, is wholly between citizens of different states; and (b) because the plaintiff alleges in good faith and upon reasonable grounds that the state is attempting to violate a contractual obligation which, under the Federal Constitution (art. 1, § 10) cannot be impaired. It has jurisdiction as a court of equity:

First, because in this instance "the attempted enforcement of a tax upon property which has been exempted by proper legislative authority from the burdens of taxation, constitutes a grievance of so irreparable a nature as to merit preventive relief by injunction." High on Injunctions (4th Ed.) p. 504, § 530; Osborn v. Bank, 9 Wheat. 739, 6 L. Ed. 204; Fargo v. Hart, 193 U. S. 502, 24 S. Ct. 498, 48 L. Ed. 766; City of Dallas v. Higginbotham-Bailey-Logan Co. (C. C. A. 5) 37 F.(2d) 513; Board of Assessors v. Pullman's Palace-Car Co. (C. C. A. 5) 60 F. 37.

Second, because the exemption covering realty and the tax being a lien thereon, the threatened action of defendants (which it is agreed will be carried into execution unless restrained) will cast a cloud upon plaintiff's title which only a court of equity is able to prevent or dispel. Hughes, Federal Practice, c. 15, § 1103, p. 307; Wilson v. Lambert, 168 U. S. 612, 18 S. Ct. 217, 42 L. Ed. 600; Dows v. Chicago, 11 Wall. 110, 20 L. Ed. 65; Ohio River, etc., Co. v. Dittey, 232 U. S. 587, 34 S. Ct. 372, 58 L. Ed. 737.

Other grounds of equitable relief are relied upon by the plaintiff; but it is unnecessary to enumerate or pass upon them, as the combination of the two above mentioned seems to the court to be sufficient.

On the merits, the defendants assert that the exemption is void upon three main grounds:

First, the plaintiff is a foreign corporation.

Second, it is not a new enterprise of public utility.

Third, its property is not used for distribution.

There is nothing in the state Constitution which forbids the grant to foreign corporations of the exemption here assailed. The defendants contend that the exception in section 182 of the Constitution of 1890 applies to domestic corporations only. The section is as follows: "Section 182. The power to tax corporations and their property shall never be surrendered or abridged by any contract or grant to which the state or any political subdivision thereof may be a party, except that the legislature may grant exemption from taxation in the encouragement of manufactures and other new enterprises of public utility extending for a period not exceeding five years, the time of such exemptions to commence from date of charter, if to a corporation; and if to an individual enterprise, then from the commencement of work; but when the legislature grants such exemptions for a period of five years or less, it shall be done by general laws, which shall distinctly enumerate the classes of manufactures and other new enterprises of public utility entitled to such exemptions, and shall prescribe the mode and manner in which the right to such exemptions shall be determined."

If the defendants' contention be true, then this entire section applies to domestic corporations only, and there is no applicable limitation on the legislative power as to foreign corporations, other than section 181 of the same Constitution, which says: "The property of all private corporations for pecuniary gain shall be taxed in the same way and to the same extent as the property of individuals." Construing the two sections together, we conclude that exemptions granted to domestic corporations must commence "from date of charter," and to individuals or foreign corporations, from "the commencement of work." In any event, we find the Legislature free to grant to foreign corporations the exemption here asserted, provided only individuals are "taxed in the same way and to the same extent," which is true of the legislation now under consideration.

The problem then before the court is whether the Legislature intended to include foreign corporations in its enactments granting "exemption from taxation in the encouragement of manufactures and other new enterprises of public utility." Chapter 138, Laws Miss. 1922; chapter 172, Laws Miss. 1926. If a primary purpose of the legislation was to induce outside capital to come into the state, we can think of no sound reason why the lawmakers would desire to exclude foreign corporations. In Robertson, State Revenue Agent, v. Mississippi Packing Co., 134 Miss. 837, 98 So. 539, 540, the state revenue agent sought to assess a Virginia corporation before a five-year period of exemption (to which it had succeeded) had expired. The Supreme Court of Mississippi held the Virginia corporation entitled to enjoy the exemption. It said:

"It is not who the owners are or have been. Nor whether the operation of the business has ceased and begun again. We hold that appellee's plant in the sense of the statute was established on February 21, 1910, the date of the charter of the Natchez Packing Company.

"The Natchez Packing Company was entitled to the exemption from the date of its charter, February 21, 1910, for a period of 5 years, which therefore ended on February 21, 1915, and appellee, as the owner of the plant, is entitled to the benefit of that exemption up to the latter date. From the expiration of that exemption, appellee's property was subject to taxes as other property in Adams county."

This case was under a prior statute, giving similar...