Johnson v. Wall

• Decision Date: 02 August 1963
• Docket Number: No. C-170-W-62.,C-170-W-62.
• Court: U.S. District Court — Middle District of North Carolina
• Parties: Lora Belle JOHNSON, Plaintiff, v. J. E. WALL, Director of Internal Revenue, Defendant

219 F. Supp. 4

Lora Belle JOHNSON, Plaintiff, v. J. E. WALL, Director of Internal Revenue, Defendant

No. C-170-W-62.

United States District Court M. D. North Carolina, Wilkesboro Division.

August 2, 1963.

Richard A. Vestal and Max F. Ferree, North Wilkesboro, N. C., for plaintiff.

William H. Murdock, U. S. Atty., and Roy G. Hall, Jr., Asst. U. S. Atty., Greensboro, N. C., and Herbert L. Moody, Jr., Atty., Dept. of Justice, Washington, D. C., for defendant.

EDWIN M. STANLEY, Chief Judge.

The plaintiff, Lora Belle Johnson, seeks to enjoin the defendant, J. E. Wall, District Director of Internal Revenue, his agents and servants, from foreclosure of a federal tax lien on plaintiff's property. Jurisdiction of this court is invoked "pursuant to its general equity jurisdiction."

The plaintiff has offered no evidence, and relies solely upon the allegations of her unverified complaint to support her claim for relief. In substance, the plaintiff alleges that she was tried in this court in May, 1959, on a bill of indictment charging the removal, concealment and sale of a small quantity of nontaxpaid distilled spirits, and another indictment charging a conspiracy to violate the Internal Revenue laws relating to distilled spirits; that she was convicted on the indictment charging removal, concealment and sale, but was acquitted on the conspiracy indictment; that in September, 1959, the defendant filed in the office of the Register of Deeds of Wilkes County a lien in the sum of $2,333.86, which embraces the nontaxpaid distilled spirits referred to in the conspiracy case in which she was acquitted; that the assessment is illegal and invalid as a matter of law because she was acquitted of the conspiracy charge, and the illicit distillery referred to in the conspiracy indictment was not found on her premises; that the defendant has threatened plaintiff with the foreclosure of the tax lien by selling her farm; that she has no adequate remedy at law for the reason that her legal remedy would require a payment of the tax and a suit for refund, which would work a personal and irreparable hardship due to the fact that she would be forced to sell her home in order to raise sufficient funds to pay the tax; and that since she derives a greater portion of her income from her farm operations, the sale of her home to pay the tax would result in her being deprived of her main source of income and leave her destitute and without a home.

The defendant has moved to dismiss the complaint on the grounds that (1) the court lacks jurisdiction of the subject matter of the action because the plaintiff seeks to enjoin the collection of Internal Revenue taxes, which is prohibited by § 7421 of the Internal Revenue Code of 1954 (26 U.S.C. § 7421), (2) the court lacks jurisdiction of the defendant, J. E. Wall, District Director of Internal Revenue, since the action seeks to restrain and control him in the performance of his official duties as an agent of the United States of America, with respect to a matter in which the United States has not waived its sovereign immunity, and (3) the court lacks jurisdiction over the subject matter of the action because it involves a controversy with respect to federal taxes and the plaintiff is seeking declaratory relief as to federal taxes against her, which is prohibited by § 2201 of Title 28, United States Code.

Section 7421(a) of the Internal Revenue Code of 1954 (26 U.S.C.A. § 7421 (a)) provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court," except as provided in certain sections relating to income, gift and estate taxes, which the plaintiff concedes has no application to the controversy here involved.

Notwithstanding the mandatory language of § 7421(a), and completely apart from the statutory exemptions contained in that section, an exception to the statutory ban on injunctions has been developed and enunciated by the courts. One of the leading cases in this area of the law is Miller v. Standard Nut Margarine Co., 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422 (1932), where it is held that general equity power to enjoin the collection of federal taxes may only be invoked upon a showing of (1) the illegality of the tax and (2) the existence of "special and extraordinary circumstances." Both tests must be met. On the question of the illegality of the tax, it was held in Enochs v. Williams Packing Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 1129, 8 L.Ed.2d 292 (1962), that the law and the facts should be most liberally construed in favor of the United States, and that nothing more than good faith on the part of the Government is required. At 370 U.S. page 7, 82 S.Ct. at page 1129, the court stated:

"Only if it is then apparent that, under the most liberal view of the law and the facts, the United States cannot establish its claim, may the suit for an injunction be maintained. Otherwise, the District Court is without jurisdiction, and the complaint must be dismissed. To require more than good faith on the part of the Government would unduly interfere with a collateral objective of the Act—protection of the collector from litigation pending a suit for refund."

On her claim that the assessed tax is illegal, plaintiff relies wholly upon her acquittal of the charge alleging a conspiracy to violate the Internal Revenue laws relating to distilled spirits, and cites as authority the case of Coffey v. United States, 116 U.S. 436, 6 S.Ct. 437, 29 L.Ed. 684 (1886), and some later decisions applying the legal principles laid down in the Coffey case. Such reliance is not well placed. In the first place, a substantive offense and a penalty were involved in Coffey, not a conspiracy and a tax. In the second place, the authority of Coffey has been seriously impaired, and is now considered to be of doubtful validity.

It was entirely possible for the plaintiff to have been the owner and operator of the illicit distilleries referred to in the conspiracy indictment, and subject to the assessed tax, without being guilty of a conspiracy. Conspiracy involves an agreement or...