Mid-Continent Airlines v. Nebraska State Board of Eq.

Decision Date07 June 1952
Docket NumberCiv. No. 32-51.
PartiesMID-CONTINENT AIRLINES, Inc. v. NEBRASKA STATE BOARD OF EQUALIZATION AND ASSESSMENT et al.
CourtU.S. District Court — District of Nebraska

William J. Hotz and William J. Hotz, Jr. (Hotz & Hotz), of Omaha, Neb., for plaintiff.

Clarence S. Beck, Atty. Gen. of Nebraska, and William T. Gleeson, Asst. Atty. Gen. of Nebraska, for defendants.

Before WOODROUGH, Circuit Judge, DONOHOE, Chief Judge, and DELEHANT, District Judge.

DELEHANT, District Judge.

The plaintiff, a Delaware corporation, duly licensed by Civil Aeronautics Board to engage in interstate transportation of persons, property and mail by air for hire, and actually engaged in such transportation upon approved routes and schedules including the service of points in Nebraska, brings this action against the designated defendants, including, besides the Nebraska State Board of Equalization and Assessment, its ex officio members, and the Attorney General of the State. Unquestionably, diversity of citizenship exists and the amount in controversy admittedly exceeds, exclusive of interest and costs, the sum of $3,000.

In its complaint the plaintiff prays for a decree invalidating Sections 77-1244 to 1250, R.S.Neb.1943, Reissue of 19501, and enjoining the defendants from performing any of its provisions and from taking any steps for the enforcement against the plaintiff of the taxes for 1950 and 1951 already assessed against it under the statute upon its flight equipment, and for general relief.

Briefly stated, the basis of the prayer is the allegation that the cited statute is violative of the following aspects of the Constitution of the United States:

Article I, Section 8, Clause 3, whereby the power is committed to Congress "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes";

Article I, Section 9, Clause 5, forbidding the laying of a tax on articles exported from any state;

Article I, Section 9, Clause 6, immunizing vessels bound to, or from, one state from the obligation to pay duties in another;

Article I, Section 10, Clause 2, denying to the several states the right, without the consent of congress, to "lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing" their respective "inspection laws"; and

Article I, Section 10, Clause 3, forbidding the several states without the consent of congress to "lay any Duty of Tonnage".

The state statute at which the action is aimed establishes a program whereby the defendants, each performing his appropriate portion of the duty, are empowered in behalf of Nebraska annually to evaluate, and to assess, levy, and enforce the collection of, an ad valorem tax upon, the flight equipment of air carriers incorporated or doing business in Nebraska.2 The basis of valuation upon which such tax is laid is discernible from the following excerpt from Section 77-1245, R.S.Neb.1943, Reissue of 1950:

"* * * The proportion of flight equipment allocated to this state for purposes of taxation shall be the arithmetical average of the following three ratios: (1) The ratio which the aircraft arrivals and departures within this state scheduled by such air carrier during the preceding calendar year bears to the total aircraft arrivals and departures within and without this state scheduled by such carrier during the same period; Provided, that in the case of nonscheduled operations all arrivals and departures shall be substituted for scheduled arrivals and departures; (2) the ratio which the revenue tons handled by such air carrier at airports within this state during the preceding calendar year bears to the total revenue tons handled by such carrier at airports within and without this state during the same period; and (3) the ratio which such air carrier's originating revenue within this state for the preceding calendar year bears to the total originating revenue of such carrier within and without this state for the same period."

The legislation requires each affected carrier to make to the Tax Commissioner before June 1 of each taxable year a report on a form to be prescribed by the commissioner containing the information requisite for the determination of the tax. From that information the commissioner is directed to find the value of the carrier's flight equipment and, according to the statutory formula, the proportion thereof allocable to its Nebraska operations and, upon the latter valuation, to levy a tax for the year in question "at a rate which shall be equal, as nearly as may be, to the average rate of all general taxes, state, county, municipal, school, and local, levied throughout the several taxing districts of the state for the preceding year." Section 77-1249, R.S.1943, Reissue of 1950. Finally, it is provided by Section 77-1250, R.S. Neb.1943, Reissue of 1950, that "When levied, the tax shall be collected and paid in the same manner as the tax on car companies * * *."

This court has been convened in accordance with Title 28 U.S.C.A. §§ 2281 and 2284. Thus organized, it has heard and ruled on certain motions made by the defendants and received the evidence and testimony upon the submission of the action on its merits. Briefs have been submitted by counsel, both upon the tendered motions and upon the primary demands of the plaintiff.

Without offering a detailed factual analysis, the court notes this setting for the case. The plaintiff's business offices are in Kansas City, Missouri, from which its corporate affairs and transportation operations are directed and at whose airport it has very limited hangar and repair facilities. Its flight equipment, except when in operation or temporarily halted elsewhere returns regularly, as to a "home port" to the municipal airport at Minneapolis, Minnesota. There it maintains its storage hangars and has its repair site, equipment and personnel, by whom and with which its flight equipment undergo required periodical testing, inspection and repair as well as servicing, of a routine nature and of emergency origin.

Its transportation operations for the carriage of persons, freight, express and mail extend through the air along routes over parts of Minnesota, Wisconsin, the Dakotas, Iowa, Illinois, Missouri, Arkansas, Oklahoma, Texas, Louisiana and Nebraska, in each of which states it has terminal facilities at one or more airports.

Throughout 1950, its only Nebraska terminal was at Omaha at which point in interstate operations it handled arriving and departing items of carriage of both persons and things including mail. But, by order upon application and hearing, and under a Certificate of Public Convenience and Necessity, the Civil Aeronautics Board of the United States, under date of May 16, 1951 granted the plaintiff authority for the period of three years commencing July 15, 1951 to utilize Lincoln, Nebraska also as a terminal point on certain flights. Since the effective date of that order and certificate its authority has been enjoyed and utilized by the plaintiff not only in its interstate operations, but also in intrastate carriage between Omaha and Lincoln.

The taxes already assessed against the plaintiff under the statute are those for 1950 and 1951, supra. For 1950 the plaintiff in compliance with the statute made its return, upon the basis of which the tax was computed and assessed. For 1951 the plaintiff refused to make a return, and in default of such a return the state authorities assessed the tax on the basis of the data within their possession.

The foregoing facts seem to the court to disclose the background of the case adequately for the ruling which is now announced. They would be substantially enlarged upon as the basis of decision, if the court were not persuaded that it ought not to determine the action on its merits.

For in the nature of the relief sought by the plaintiff, the court, before reaching a final decision on the prayer of the complaint, is confronted by the question of its jurisdiction, in the light of the nature and history of the tax in suit. That question would inevitably arise even in default of its presentation by the parties. But it has also been explicitly urged by the defendants. Before answering, they moved to dismiss on several grounds including the contention that the plaintiff had certain specified plain, speedy and efficient remedies3 in the courts of Nebraska. That motion was denied on hearing. Thereupon, the defendants moved for an order staying the action and directing the plaintiff to institute in an appropriate court of the state a suit for the construction and application to the plaintiff of the challenged statute. In the latter motion the defendants pointed out the possibility that the statute might be attacked as violative of Nebraska's constitution4, the fact that no authoritative judicial construction of the challenged legislation by Nebraska's courts has ever been had, and the availability in Nebraska's courts of specifically indicated procedure whereby the issues now tendered may be presented. The court denied that motion but with the express reservation of its right, if it should be so advised, "to take the action which said motion requests, or some or any part thereof, upon its consideration of this cause after submission upon its merits". Answer, trial and submission followed. And the answer, especially in its final paragraph, preserves the jurisdictional question and points out the several unused procedural resources allegedly available to the plaintiff under Nebraska's law. (See footnote 3, supra).

Even before the intervention of immediately pertinent congressional action, infra, the courts of the United States had resolved against their entertainment and exercise of jurisdiction to intercept by injunction the enforcement and collection of state taxes on the ground of their repugnance to the constitution of the United States, in instances in which the law...

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4 cases
  • Kimmey v. HA Berkheimer, Inc., Civ. A. No. 72-1588
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    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • May 20, 1974
    ...1221, 1225-1226 (E.D.N.Y.1971); Olan Mills, Inc. v. Opelika, 207 F.Supp. 332, 334 (M.D.Ala.1962); Mid-Continent Airlines v. Nebraska State Board of Eq., 105 F.Supp. 188, 193-194 (D.Neb.1952), and Collier Advertising Service v. City of New York, 32 F.Supp. 870, 872 (S.D. N.Y.1940). The Court......
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    ...860; Chicago and North Western Railway Company v. Lyons, D.C., 148 F.Supp. 787, 792; Mid-Continent Airlines, Inc., v. Nebraska State Board of Equalization and Assessment, D.C., 105 F.Supp. 188, 199; Kansas City Southern Ry. Co. v. Morley, D.C., 88 F.Supp. 300, 303, 304; Independent Warehous......
  • Offutt Housing Co. v. Sarpy County, 33658
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    • May 6, 1955
    ...comparable Nebraska cases too numerous to cite here are cited and comprehensively discussed in Mid-Continent Airlines v. Nebraska State Board of Equalization & Assessment, D.C., 105 F.Supp. 188. As indicated therein, this court has uniformly upheld the right to enjoin taxes which are demons......
  • Chicago, St. P., M. & O. Ry. Co. v. City of Randolph, Civ. 36-53.
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    • June 21, 1954
    ...or unauthorized purpose. In overruling the motion based upon the foregoing ground the court cited Mid-Continent Airlines v. Nebraska State Board of Education, D.C., 105 F.Supp. 188, 195, which is suggestive of the real jurisdictional problem involved in this case; and although counsel for t......

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