Interstate Natural Gas Co. v. Gully

• Decision Date: 17 September 1934
• Docket Number: No. 444.,444.
• Citation: 8 F. Supp. 174
• Parties: INTERSTATE NATURAL GAS CO., Inc., v. GULLY, State Tax Collector, et al.
• Court: U.S. District Court — Southern District of Mississippi

8 F. Supp. 174

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

No. 444.

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

September 17, 1934.

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

Walter Sillers, Jr., of Rosedale, Miss., Edward W. Smith, of Clarksdale, Miss., and W. E. Gore, of Jackson, Miss., for defendants.

HOLMES, District Judge.

At the instance of the state tax collector, the state tax commission was proceeding to assess the plaintiff's real and personal property, situated in Mississippi, for ad valorem taxes for the years 1927, 1928, 1929, 1930, and 1931. As provided by local statutes, he gave notice to the tax commission that said property had escaped taxation for said years and directed that it be assessed. The tax commission, in accordance with law, made a tentative assessment, and gave the plaintiff notice to appear on a day certain to show cause why it should not be made final. The plaintiff appeared on the day named; the hearing was had; and, at the conclusion thereof, the commission announced its determination to make the assessment final. By consent of all parties, the order was not entered at that time, but the matter was continued to a later day, fixed in the order of continuance, when it would certainly have been made final but for the restraining order issued herein, followed by an interlocutory and final injunction. Interstate Natural Gas Co. v. Gully (D. C.) 4 F. Supp. 697. On direct appeal to the Supreme Court (292 U. S. 16, 54 S. Ct. 565, 78 L. Ed. 1088), it was held that, since there was no substantial question presented as to the validity of the statute authorizing assessments of property which had escaped taxation, and since no statute specified the company's property, but authorized assessments only of property that was taxable, there was no occasion for constituting a court of three judges; and, without passing upon the merits, the decree was reversed and the cause remanded to the District Court for further proceedings to be taken independently of section 266 of the Judicial Code, as amended (28 USCA § 380).

The three-judge court having been dissolved, the cause has been reargued on amended and supplemental pleadings, elicited by legislation, both state and federal, enacted since the original bill was filed, and is now submitted for decision on a motion to dismiss the bill, made by the defendants, and a motion for an interlocutory injunction, offered on behalf of the plaintiff. These two motions, heard together, raise the following issues: (1) Federal jurisdiction; (2) equitable jurisdiction; (3) equitable fitness or propriety; (4) Declaratory Judgments Act; (5) liability for taxation.

In deciding that there was no occasion for constituting a three-judge court, the Supreme Court logically held that there was no substantial federal question in this case, but, nevertheless, there is federal jurisdiction on the ground of diversity of citizenship in a controversy where the requisite amount is involved.

The most discussed question in the argument and briefs before me has been one of equitable jurisdiction. In a former suit by the same plaintiff, wherein an injunction was granted to restrain the collection of a privilege tax, the point was not made (State Tax Commission v. Interstate Natural Gas Co., 284 U. S. 41, 52 S. Ct. 62, 76 L. Ed. 156), but later decisions settle the general rule that, in the absence of special circumstances giving rise to relief in equity, the taxpayer in Mississippi has a plain, adequate, and complete remedy at law by payment of the challenged tax and suit to recover it. Matthews v. Rodgers, 284 U. S. 521, 52 S. Ct. 217, 76 L. Ed. 447; Stratton v. St. Louis S. W. R. Co., 284 U. S. 530, 52 S. Ct. 222, 76 L. Ed. 465; First National Bank of Greenville v. Gildart (C. C. A. 5) 64 F.(2d) 873.

In addition to what was said in the former opinion with reference to equitable jurisdiction (4 F. Supp. 697), the special circumstances in this case sufficient to warrant equitable relief, alleged in the bill and admitted by the motion to dismiss, are that the state tax collector is insolvent, with uncollected and uncollectible judgments outstanding against him; that under section 6999, Code 1930, he retains 20 per cent. of all amounts collected by him to pay his own salary and expenses; and that he is under an inadequate bond; the same being for less than the amount of the taxes demanded. The same allegations are made with reference to the various sheriffs and tax collectors of the counties who would handle a part of the funds, and, with reference to some of them, it is specifically alleged that the surety on their official bonds is insolvent and in the hands of a receiver. It is shown that, if this money gets into the hands of the insolvent tax collectors and, after deducting their commissions, is faithfully paid over by them to the state, counties, cities, and various taxing districts, in the proportion which each is entitled to receive, it would require a multiplicity of suits to recover it. Other facts alleged show imminent danger of irreparable loss to the plaintiff if required to pay the tax, but it is not deemed necessary to discuss them, further than to say that, so far as well pleaded, the motion to dismiss admits them, even with reference to the financial embarrassment of the state, to whom a part of the money will be paid, and which cannot be refunded except by an act of the Legislature appropriating the same.

Although it is admitted that the assessment will be made unless the injunction is granted, it is claimed that the bill was prematurely filed, because the plaintiff has not exhausted its administrative remedy. This admission is made as a matter of law by the motion to dismiss, because the allegation is made in the bill to that effect; it was made, as a matter of fact, in writing on the former hearing; and it was practically made orally by the attorney for the state tax commission on the latest hearing. So it is as certain as anything in the future can be that, as soon as it is free to do so, the tax commission will complete the assessment of plaintiff's property by manually entering the order, or having its clerk enter it, in fulfillment of its previously declared intention. In the recent case of City Bank Farmers' Trust Company v. Schnader, 291 U. S. 24, 54 S. Ct. 259, 78 L. Ed. 628, the court said it did not feel inclined to require dismissal under such circumstances. There is an additional equity here, not present in the Schnader Case. If the bill is dismissed, the injunction denied, and the assessment made by the tax commission, the plaintiff whose property is exempt from taxation will be in a dilemma. It will either have to pay the tax to insolvent tax collectors and seek to recover it by a multiplicity of suits; appeal to the circuit court of the county; or refile a similar suit in equity in this court. It cannot be certain of its course. According to the defendants, relying on First National Bank v. Gildart (C. C. A.) 64 F.(2d) 873, it will not have exhausted its administrative remedy until it has appealed to the circuit court of the county and caused...