Memphis Natural Gas Co. v. Gully

• Decision Date: 17 September 1934
• Docket Number: No. 450.,450.
• Parties: MEMPHIS NATURAL GAS CO. v. GULLY, State Tax Collector, et al.
• Court: U.S. District Court — Southern District of Mississippi

8 F. Supp. 169

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

No. 450.

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

September 17, 1934.

Green, Green & Jackson, of Jackson, 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.

There is presented by this bill and application for preliminary injunction a similar claim of tax exemption to that just decided in Interstate Natural Gas Company v. J. B. Gully, State Tax Collector (D. C.) 8 F. Supp. 174. This plaintiff is a foreign corporation which applied for, and was granted, a five-year exemption from ad valorem taxation. The exemption was approved by the Attorney General of Mississippi as being in conformity to its laws and Constitution. On the faith of the grant, which has never been repealed, the plaintiff entered the state as "a new enterprise of public utility," and expended several millions of dollars in tangible property necessary to the operation of the service which it is performing. The right of exemption has never been questioned by legislative act or resolution, and was respected by the executive officers of the state from June 11, 1928, until the 4th day of November, 1932, when, upon a shift in the office of state tax collector, the present incumbent notified the tax commission that plaintiff's property had escaped taxation by reason of not being assessed for the years 1929, 1930, and 1931, and directed the commission to assess said property for each of said years at a valuation of $2,703,710. The plaintiff, on notice, appeared before the commission and objected to the assessment, claiming an exemption from June 11, 1928, until June 11, 1933. After an all-day hearing, the commission announced its intention to make the assessment final, but, before the entry was made, a temporary restraining order, forbidding it, was issued by this court on the application of the defendant.

The bald contention of the gas company is that its property is not subject to taxation, because it falls within a specially exempted class under a general law sanctioned by constitutional provision, and that the Attorney General, acting under such law and the Constitution, has approved the same. The contention of the defendants is that the plaintiff is not a member of the exempted class within the intent of the Legislature, and that, if the act should receive such construction, it would be void as violative of section 182 of the state Constitution, which forbids the surrender or abridgement by the state of the power to tax corporate property. The plaintiff replies that there is an exception in section 182 which permits the Legislature to "grant exemption from taxation in the encouragement of manufactures and other new enterprises of public utility," which elicits the rejoinder that plaintiff is not a public service corporation, and therefore is not a "public utility." To the argument that a wagon factory and like "manufactures" are not public service corporations, and that the word "other" before "new enterprises of public utility" precludes such a construction, the suggestion is made that such word "other" should be "dropped out" of the Constitution, "because it does not make sense, and only leads to conflict and confusion in an attempt to construe the section." In the case of Interstate Natural Gas Company v. J. B. Gully, 4 F. Supp. 697, I have expressed the view that the court was not justified in thus eliminating from the fundamental law the word "other" to defeat the claimed exemption from state and county taxes. I shall not review the reasons therein given further than to say that I find nothing in the Constitution, statutes, or decisions of the state of Mississippi to indicate that the proffered exemptions were intended for domestic corporations only. It should be remembered that the exemption was from ad valorem taxation, and that its primary purpose was to induce foreign capital to come into the state. It could not matter much whether it belonged to a domestic or foreign corporation, to a resident or nonresident individual; but I rather suspect that the bait was held out less for the resident than the nonresident, as the former's capital in the majority of instances was already invested within the state while the latter's was not. Neither was it vital whether the new capital was invested in property used in intrastate or interstate commerce. Either business would give people employment, and the property therein used would in each instance be subject to ad valorem taxation after the five-year exemption period had expired. I further find that both the administrative officers and the courts of the state have allowed the exemptions to residents and nonresidents alike, and that such was the contemporaneous construction of the act even in this case. In the Interstate Nat. Gas Co. Case the period of exemption had expired (and in this case three years of it) before it was questioned. If it was a contract, it was an executed one; if it was a nudum pactum, it was a completed transaction; if it was a bounty, it was construed by the Attorney General to entitle the plaintiff to the exemption claimed, and this decision by the state's highest law officer, specially designated by statute to exercise a discretion with regard thereto, has never been recalled, reviewed, or questioned by him or any of his several successors in office.

There is this subordinate question not present in the Interstate Nat. Gas Co. Case. The tax collector claims that no exemption was granted from levee taxes, regardless of the outcome of the controversy over state and county taxes; but a decision with respect to this matter may properly await the final hearing of the case. At this time it is my purpose to refer again to the question of comity and, without repetition, to deal with it from a somewhat different aspect. It appears that there is no substantial assailment by the plaintiff of a state statute, but that its best reliance for exemption of its property from taxation is upon the law and Constitution of the state. That there is a controversy in this case over the liability of corporate property for taxation, or over the right of tax exemption, involving nearly a half million dollars, is beyond disputation; that it may become justiciable at some stage is clear, but whether that stage has been reached at this time, and, if not, when it will be reached under the procedure in Mississippi for assessment of property for taxation, is one of the questions which the attorneys have debated at length. There is doubt and confusion in the decisions. This confusion is worse confounded by House Bill No. 960, enacted by the Mississippi Legislature during the pendency of this litigation, approved March 31, 1934 (Laws 1934, c. 206), providing for appeals from assessments by the tax commission to the judge of the circuit court. The defendants contend that the judge becomes an appellate assessor, and that the proceeding before him is essentially administrative. Such a construction would render the act unconstitutional and void. The circuit judge is a judicial officer, and administrative duties may not be conferred upon him except when incidental and essential to the performance of his judicial functions. In Yazoo & M. V. R. Co. v. Adams, 81 Miss. 90, 32 So. 937, 942, it was held that railroad assessors had no power to determine a question of exemption from taxation involving the constitutional authorization of the Legislature, because such question "pertains to the highest and most important exercise of the judicial functions." In The City of Jackson v. Preston, 93 Miss. 366, 47 So. 547, 21 L. R. A. (N. S.) 164, an exemption was judicially upheld in an independent action at law, although the taxpayer did not appeal from the assessment by the board of supervisors. In North American Old Roman Catholic Diocese v. Havens, 164 Miss. 119, 144 So. 473, 84 A. L. R. 1313, the court held that, church property not being absolutely exempt from taxation, the owner should appear before the board of supervisors and present his objections, and, if aggrieved at the decision of the board, should appeal to the circuit court where the case might be tried de novo. Not having done so, relief...