Northwood Apartments v. Lavalley

• Decision Date: 14 May 1981
• Docket Number: No. 79-1536,79-1536
• Citation: 649 F.2d 401
• Parties: NORTHWOOD APARTMENTS, Plaintiff-Appellant, v. Max LaVALLEY, Thomas Sommerville and City of Royal Oak, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 401

649 F.2d 401

NORTHWOOD APARTMENTS, Plaintiff-Appellant, v. Max LaVALLEY, Thomas Sommerville and City of Royal Oak Defendants-Appellees.

No. 79-1536.

United States Court of Appeals Sixth Circuit.

Argued Feb. 5, 1981.

Decided May 14, 1981.

Thomas J. Beale, Hyman, Gurwin, Nachman, Friedman & Winkelman, Southfield, Mich., for plaintiff-appellant.

Milton Lucow, Rosalind Rochkind, Garan, Lucow, Miller, Lehman, Seward & Cooper, Detroit, Mich., Terrance H. Brennan, Daniel Sawicki, Royal Oak, Mich., for defendants-appellees.

Before MERRITT and BROWN, Circuit Judges, and PHILLIPS, Senior Circuit Judge.

BAILEY BROWN, Circuit Judge.

Northwood Apartments operates a 121 unit apartment building in the City of Royal Oak, Michigan. On July 27, 1978, Northwood filed a civil rights damage action under 42 U.S.C. §§ 1983 and 1985 and their jurisdictional counterpart, 28 U.S.C. § 1343, in the United States District Court for the Eastern District of Michigan. Northwood alleged that the City of Royal Oak, acting through the city assessor, Max La Valley, and the deputy assessor, Thomas Sommerville, as part of a conspiracy against Northwood, illegally increased Northwood's property assessment with the result that Northwood's taxes were increased by about 20 per cent in 1978. Northwood further alleges that the action was in retaliation for Northwood's appeal of the earlier assessments. Northwood contends that, in deliberately and maliciously reassessing the property at a higher value, defendants violated Northwood's constitutional rights to due process, free access to the courts, and equal protection. The district court, on defendants' motion, dismissed the complaint either for lack of subject matter jurisdiction or alternatively, on abstention grounds. ¹ After a thorough review of the record in this case, we find neither ground to be a sufficient basis for the district court's grant of this motion. We therefore reverse the grant of the motion to dismiss for the reasons given below and remand for further proceedings consistent with this opinion.

I

Northwood Apartments is a Michigan copartnership operating in the City of Royal Oak. In 1975, there was a citywide reassessment of apartment properties. Northwood believed that its 1975 assessment was too high and appealed the assessment to the Michigan Tax Tribunal. ² While the appeal was still pending in 1976, Northwood appended its assessment for 1976, which had not changed from 1975, to the original appeal. In 1977, there was another citywide reassessment of apartment properties, and Northwood's assessment was again increased. Northwood appended the 1977 assessment to its pending appeal. In 1978, although no citywide reassessment of apartment properties was made, Northwood was reassessed and its taxes were increased by about 20 per cent. This assessment was also appended to the original appeal.

In May, 1978, the Michigan Tax Tribunal held a hearing on the petitions for reassessment. The Tribunal determined that Northwood made an insufficient showing of protest to the local board of review for the 1977 assessment, and therefore, the Tribunal had no jurisdiction to review the 1977 assessment. This action is not contested here. The assessments for 1975, 1976 and 1978 were taken under consideration.

In July, 1978, as stated, Northwood filed this action for damages alleging violations of 42 U.S.C. §§ 1983 and 1985(3), as well as pendent state law claims for abuse of process and malicious use of process. Northwood alleged that the City of Royal Oak, LaValley, and Sommerville ³ (hereinafter collectively referred to as defendants) intentionally and maliciously reassessed Northwood's property in 1978 to punish Northwood for appealing its earlier assessments and to deter Northwood from further prosecuting its appeal before the Michigan Tax Tribunal. The complaint further alleged:

The only other apartment owner in the City of Royal Oak who was reassessed in 1978 was another property owner who, like the plaintiff, had appealed its prior years' valuations to the Michigan Tax Tribunal.

The original complaint sought a declaratory judgment and a permanent injunction as well as compensatory and punitive damages, attorney's fees and other costs. Further, Northwood sought class certification to represent persons who owned property in Royal Oak. Before the district court ruled on the motion to dismiss, Northwood withdrew its claim for declaratory and injunctive relief and for class certification.

In September, 1978, the Michigan Tax Tribunal reduced the assessment of Northwood's property for 1975 and for 1976 from $810,000 to $625,000. The 1978 assessment was reduced from $1,028,000 to $750,000. ⁴

In July, 1979, defendants filed a motion to dismiss. In their briefs and at the hearing, defendants raised two arguments in support of their motion to dismiss. First, they asserted that there was no subject matter jurisdiction as the action was barred by the Tax Injunction Act, 28 U.S.C. § 1341. Second, they argued that even if the action was not barred by the Act, the same policies of federalism and comity which led to the passage of the Act should lead the court, in its discretion, to abstain from accepting jurisdiction. The district court indicated its ruling on the motion from the bench, stating:

I do abstain because I think this would have, if I entertained jurisdiction in this case we are going to entertain jurisdiction in many cases where similar claims are made. There may be a good claim in some and maybe not in others I don't know.

The collections are the lifeblood of government, no question about it. They have to have taxes. When federal courts start punishing state officers for the way they perform their function it will not only have a chilling effect but a terrifying effect

I think there is a degree of discretion. However, I believe it would be an abuse of discretion under the circumstances to grant (sic) this motion. Even if it would not be abused, if it's one of these areas the court could go either way, I would go this way because I think it's more appropriate knowing you would get a fair trial in state court.

The court subsequently entered a brief order of dismissal in which the only reason given for dismissal was that it appeared to the court that "it should abstain from asserting jurisdiction over this action." Although both the statement from the bench and the order spoke in terms of abstention, the order also provided that "Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction" is granted. As defendants' motion to dismiss contended both that there was no subject matter jurisdiction and, in the alternative, that if there was subject matter jurisdiction, the court should dismiss on abstention grounds, we address both contentions.

For the purposes of this review, the allegations of the complaint are deemed admitted. Walker Process Equip., Inc. v. Food Machinery and Chem. Corp., 382 U.S. 172, 174-75, 86 S.Ct. 347, 348-49, 15 L.Ed.2d 247 (1965).

II

We deal first with defendants' argument that this action is precluded under the Tax Injunction Act, 28 U.S.C. § 1341. The Act provides that:

The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy, and efficient remedy may be had in the courts of such State.

The Act expressly prevents the district courts only from enjoining, suspending, or restraining assessment, levy, or collection of taxes. Northwood, however, does not seek to accomplish any of these objectives, either directly or indirectly. Northwood seeks compensatory and punitive damages, costs, and attorney's fees from the city and two city officials who, according to Northwood's allegations, deliberately overassessed Northwood's property to punish Northwood for appealing its property assessment to the Michigan Tax Tribunal and to discourage Northwood from further prosecuting the appeal. Therefore, we must examine the legislative history of the Tax Injunction Act to determine if the Act impliedly precludes the present damage action.

This same issue, whether the Tax Injunction Act prevented a taxpayer from bringing suit for damages, was examined by the Seventh Circuit in Fulton Market Cold Storage Co. v. Cullerton, 582 F.2d 1071 (7th Cir. 1978), cert. denied, 439 U.S. 1121, 99 S.Ct. 1033, 59 L.Ed.2d 82 (1979). Plaintiffs in Fulton, relying on 42 U.S.C. § 1983, alleged that the Cook County Assessor "systematically, knowingly, intentionally, fraudulently and invidiously assessed its property at levels other than permitted by law and greatly in excess of the levels at which property in Cook County was generally assessed." 582 F.2d at 1073. The district court dismissed the complaint relying on the Tax Injunction Act or alternatively on the Act's underlying policy considerations. Plaintiffs appealed, and the Seventh Circuit reversed, holding that the Tax Injunction Act did not bar a § 1983 action for damages. In so holding, the Seventh Circuit carefully reviewed the legislative history as well as the cases decided under the Act. See 582 F.2d at 1074-80. See also United Gas Pipe Line Co. v. Whitman, 595 F.2d 323 at 324-30 (5th Cir. 1979). Therefore, we will not set out in detail in this opinion the history of the Tax Injunction Act.

Reviewing the history of the Act, we conclude, as did the Seventh Circuit, that the purpose of the Tax Injunction Act was to bar any action for equitable relief which would disrupt the state taxing process.

The report of the Senate Judiciary Committee, U.S.S.Rep.No.1035, 75th Cong., 1st Sess. 1-2 (1937), as summarized in Tramel v. Schrader, 505 F.2d 1310 (5th Cir. 1975), reveals that the Tax Injunction Act was aimed at two basic problems.

First, Congress noted that some foreign corporations were in the habit of delaying the payment of taxes through an action in federal court since they could invoke diversity jurisdiction. State citizens,...