Marx v. Truck Renting and Leasing Ass'n Inc., No. 57130

• Court: United States State Supreme Court of Mississippi
• Writing for the Court: SULLIVAN; WALKER; ROBERTSON; DAN M. LEE; PRATHER; ROBERTSON; PRATHER
• Citation: 520 So.2d 1333
• Docket Number: No. 57130
• Decision Date: 30 September 1987
• Parties: Charles A. MARX, Ph.D., Chairman, State Tax Commission & Commissioner of Revenue, State of Mississippi v. TRUCK RENTING AND LEASING ASSOCIATION, INC., Ryder Truck Rental, Inc., and Saunders System, Inc.

Page 1333

520 So.2d 1333 Charles A. MARX, Ph.D., Chairman, State Tax Commission &
Commissioner of Revenue, State of Mississippi
v.
TRUCK RENTING AND LEASING ASSOCIATION, INC., Ryder Truck
Rental, Inc., and Saunders System, Inc. No. 57130. Supreme Court of Mississippi. Sept. 30, 1987.
Rehearing Denied March 16, 1988.

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Gary W. Stringer, Jackson, for appellant.

William N. Reed, J. Brad Pigott, Watkins, Ludlam & Stennis, Jackson, for appellee.

En Banc.

SULLIVAN, Justice, for the Court:

Truck Renting and Leasing Association, Inc., (TRLA), Ryder Truck Rental, Inc., (Ryder), and Saunders System, Inc. (Saunders), plaintiffs, filed a complaint in the Chancery Court of the First Judicial District of Hinds County against Charles Marx, Chairman, State Tax Commission and Commissioner of Revenue for the State of Mississippi seeking declaratory and injunctive relief from Section 27-65-23 of the sales tax portion of the Mississippi Code Annotated (Supp.1984).

The complaint challenged the statute as violating the Commerce Clause of the United States Constitution and the Due Process Clauses of the United States Constitution and the Mississippi Constitution of 1890. The statute purports to impose a six percent (6%) tax on the gross income of companies renting or leasing transportation equipment located outside the State of Mississippi through rental agreements entered into outside the State of Mississippi.

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The State Tax Commission filed a subsequent motion to dismiss, challenging the jurisdiction of the chancery court to adjudicate the matter. Plaintiffs filed a motion for summary judgment supported by affidavits. A hearing on both motions was held on January 7, 1986, and the chancellor ruled that the statute was unconstitutional as it attempted to tax non-Mississippi leases on non-Mississippi trucks without the occurrence of any transaction by the lessor in the State of Mississippi. The chancellor concluded that he had jurisdiction to adjudicate the matter, and he permanently enjoined the collection, assessment, or levy of taxes under Section 27-65-23. The Tax Commission now appeals this decision assigning the following as error:

I. The lower court erred in finding that appellees' action for both injunctive and declaratory relief was not barred by Mississippi Code Annotated Sec. 27-65-71 (1972);

II. The lower court erred in finding that jurisdiction existed under Mississippi Code Annotated Sec. 11-13-11 (1972), for appellees' action for injunctive relief;

III. The lower court erred in finding that Section 159(f) of the Mississippi Constitution of 1890 vested constitutional jurisdiction in the chancery court to enjoin the collection of Mississippi sales tax;

IV. The lower court erred in finding that an action to enjoin under Miss.Code Ann. Sec. 11-13-11 (1972) was not barred where an adequate remedy at law existed;

V. The lower court erred in finding that appellees' ability to remit the disputed tax and to seek a refund under Mississippi Code Annotated Sec. 27-65-47 (1972) and Sec. 27-65-49 (1972) does not constitute an adequate remedy at law that would bar appellees' action for injunctive and declaratory relief;

VI. The lower court erred in failing to continue, under Rule 56(f) of the Mississippi Rules of Civil Procedure, the hearing on appellees' motion for summary judgment pending completion of discovery by appellant;

VII. The lower court erred in failing to find that genuine issues as to material facts exist that barred the awarding of summary judgment to appellees.

VIII. The lower court erred in finding that the imposition of Mississippi sales tax under Mississippi Code Annotated Sec. 27-65-23 on the income of appellees from non-Mississippi leases of non-Mississippi trucks violates the Commerce Clause of the United States Constitution; and

IX. The lower court erred in finding that the imposition of Mississippi sales tax under Mississippi Code Annotated Sec. 27-65-23 on the income of appellees from non-Mississippi leases of non-Mississippi trucks violates the due process clause of the Fourteenth Amendment of the United States Constitution and the due process clause of the Mississippi Constitution of 1890.

Additionally, TRLA, Ryder and Saunders cross-appeal, assigning the following as error:

I. The chancellor erred in concluding that jurisdiction did not exist under 42 U.S.C. Sec. 1983; and

II. The chancellor erred in concluding that the plaintiffs were not entitled to an award of attorney's fees under 42 U.S.C. Sec. 1988.

TRLA, Ryder and Saunders ¹ are challenging the enforceability of Sec. 27-65-23 of the Mississippi Code Annotated (Supp.1984), which provides as follows:

Upon every person engaging or continuing in any of the following businesses or activities there is hereby levied, assessed and shall be collected a tax equal to six percent (6%) of the gross income of the business, except as otherwise provided: ...

Persons doing business in this state who rent transportation equipment with

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a situs within or without the state to common, contract or private commercial carriers are taxed on that part of the income derived from use within this state. If specific accounting is impracticable, a formula may be used with approval of the commissioner.

Plaintiffs allege that they lease trucks domiciled in states other than Mississippi for interstate travel over routes chosen by the lessees or their agents. The leases were entered into outside the State of Mississippi but did result in the equipment traveling through Mississippi on occasion. The plaintiffs complain that the statute imposes an unconstitutional burden on interstate commerce in violation of the Commerce Clause of the United States Constitution because:

(1) It imposed a tax on an activity without a substantial nexus with Mississippi.

(2) It constituted double taxation by more than one state on the same lease income.

(3) Did not permit a fair apportionment among states as to income in value generated from leases.

Under Count II, the plaintiffs allege that the tax attempts to reach transactions beyond the jurisdiction of Mississippi so as to tax values earned outside the State of Mississippi, constituting a deprivation of property without due process of law in violation of both the Constitutions of the United States and that of Mississippi. As the deprivations have been affected by the State Tax Commission under color of state law, plaintiffs assert a claim under 42 U.S.C., Sec. 1983 and seek to have the statute declared unconstitutional pursuant to Rule 57 of the Mississippi Rules of Civil Procedure. They further seek to enjoin the collection, assessment, or levy of the tax pursuant to the equity jurisdiction of the chancery court. Plaintiffs also seek attorneys fees under 42 U.S.C., Sec. 1988.

The State Tax Commission claims that the tax was a sales tax and the plaintiffs were required to pay the tax and then seek a refund as their exclusive remedy pursuant to Sec. 27-65-47 of the Mississippi Code Annotated (1972). The Commission argues further that failure to comply with this statute divested the chancery court of any jurisdiction to adjudicate the matter. Furthermore, the Commission argues that injunctive relief is not a proper remedy in that Section 27-65-71 of the Mississippi Code Annotated (1972), specifically bars any court from granting injunctive relief restraining the collection of sales tax under this chapter.

Under Mississippi Rules of Civil Procedure 12(b) the Commission filed a motion to dismiss arguing that there was an adequate remedy at law through the refund statute and that the chancery court could not invoke its equity jurisdiction to adjudicate the matter.

Plaintiffs filed a motion for summary judgment supported by affidavits. John T. McSoley, Vice President of Saunders, stated that Saunders business primarily involved the leasing of trucks domiciled outside the State of Mississippi and that at best only twenty percent (20%) of their revenue could be attributed to the mileage accumulated by the lessees during the leased term. These leases were entered into outside the State of Mississippi and that Saunders' income from such leases could not be accurately determined based upon the number or locations of mileage accumulated by their individual lessees.

Beverly Walker, the executive director of TRLA, stated that Mississippi was the only state which attempted to tax receipts entered into outside Mississippi borders on trucks domiciled outside the State of Mississippi. The result was a double taxation by more than one state on the income and value generated from the leases. Al Uritis, Sales Tax Manager for Ryder, stated basically the same thing, adding that Ryder derived only 27.4 percent of its revenue from the mileage accumulated during the lease period and that Ryder had paid a substantial sum under the sales taxes.

In response to the motion for summary judgment the Commission filed an affidavit pursuant to Rule 56(f) of the Miss.R.Civ.P. and Charles A. Marx, Chairman, stated for the Commission, that he could not present

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affidavits to justify his opposition to the motion because discovery had not been completed. He further responded to the motion for summary judgment denying all allegations in the motion and praying that the court refuse the motion pursuant to Rule 56(f) until such time as discovery could be completed.

On January 24, 1986, Chancellor Joe Moss held that the court was not barred from granting injunctive relief under Sec. 27-65-71 of the Mississippi Code Annotated (1972). The chancellor found that under 159(a) and 159(f) of the Mississippi Constitution of 1890, chancery courts retained jurisdiction over all cases which they had previous jurisdiction over prior to the enactment of the constitution. Section 1831 of the revised Code of 1880 vested jurisdiction over all suits seeking to restrain the collection of taxes without the authority of law in the...