Old Colony Trust Co v. City of Seattle

• Decision Date: 01 June 1926
• Docket Number: No. 194,194
• Citation: Old Colony Trust Co v. City of Seattle, 271 U.S. 426, 46 S.Ct. 552, 70 L.Ed. 1019 (1926)
• Parties: OLD COLONY TRUST CO. v. CITY OF SEATTLE et al
• Court: U.S. Supreme Court

271 U.S. 426

46 S.Ct. 552

70 L.Ed. 1019

OLD COLONY TRUST CO.

v CITY OF SEATTLE et al.

No. 194.

Submitted on Motion to Dismiss Dec. 7, 1925, and on Supplemental Motion to Dismiss May 10, 1926.

Decided June 1, 1926.

Mr. James B. Howe, of Seattle, Wash., for appellant.

Messrs. John F. Miller, Howard A. Hanson, and Thomas J. L. Kennedy, all of Seattle, Wash., for appellees.

Mr. Justice VAN DEVANTER delivered the opinion of the Court.

In the beginning of the year 1919 the Puget Sound Power & Light Company owned and was operating two public utilities in the city of Seattle-one a power and lighting system and the other a street railway system. It still owns and operates the power and lighting system, and the Old Colony Trust Company is the trustee in a mortgage which was given thereon in 1921 to secure a large issue of bonds still outstanding.

The city of Seattle now owns and operates the street railway system. The transfer from the Puget Sound Company to the city was effected March 31, 1919, under a contract between them entered into six weeks before. Anticipating that the system would be taxed for that year by reason of the company's ownership in the early months, they stipulated in the contract, and again in the deed of transfer, that 'state, county, and municipal taxes' laid on the property for 1919 should be borne and paid by them in proportions conforming to their respective periods of possession during the year. On that basis the company became obligated to pay one-fourth and the city three-fourths.

Shortly after the transfer, state, county, and municipal taxes aggregating over $400,000 were laid on the property for the year 1919. Of that amount over $179,000 represented taxes imposed by the city. The taxes became a lien on the property March 15, 1919, and were listed against the company in the tax records by reason of its ownership on that date. The county treasurer was to collect the taxes and pay the money over to the state, county, and city in definite proportions. If it became necessary to collect through distraint and sale, that was to be done through the sheriff.

When the taxes became due, the city refused to pay any part of them, and the county treasurer refused to receive from the company the part allotted to it by the contract and deed of transfer, and also refused to receive from it the whole of the state and county taxes, unless it also paid the city taxes. Then, because the company would not accede to paying all, the treasurer caused the sheriff to take steps to collect the whole out of the power and lighting system by distraint and sale.

The present suit was brought in the federal District Court by the Old Colony Trust Company, the mortgagee of the power and lighting system, to prevent the theatened distraint and sale of that property to pay the taxes so laid on the street railway property. The bill grounded the jurisdiction on diverse citizenship; the plaintiff being a Massachusetts corporation and the defendants being public corporations and individual citizens of the state of Washington. The original bill was brought when the sheriff was about to distrain the property. Besides setting forth the matters we have stated, it charged that the defendants were acting in concert and collusion to collect out of the mortgaged power and lighting property the taxes which had been laid on the street railway property and made a special lien thereon, and thus to relieve the city from the performance of its obligation under the contract and deed. The principal prayer was that the defendants be enjoined from resorting to the mortgaged property until after appropriate steps were taken to collect the taxes out of the property on which they were laid and were a lien. There was also a prayer for an interlocutory injunction. After the bill was filed, the sheriff distrained the mortgaged property, as before threatened, and gave public notice of intended sale. This was set up by the court's leave in a supplemental bill, which repeated the prayers of the original bill, and prayed, further, that the plaintiff, if coerced by the threatened sale into paying the taxes, be accorded the benefit of the lien on the street railway property.

The defendants appeared and moved that the two bills-original and supplemental-be dismissed for want of jurisdiction of the subject-matter and want of equity, both said to be apparent on the face of the bills. After a hearing on the prayer for an interlocutory injunction and the motion to dismiss, the prayer for the injunction was refused, and three weeks later a decree was entered, dismissing the bills for want of jurisdiction. The court allowed a direct appeal to this court, and also certified that the sole ground of the dismissal was that the suit was, in effect, a suit against the state, and therefore not cognizable in a federal District Court. The statute in force when the appeal was taken limits the consideration here to the jurisdictional question shown in the certificate.

The defendants ask that the appeal be dismissed on two grounds, in support of which they make a showing by affidavits. One ground is that the taxes have been paid, and that this has put an end to the effort to collect them from the mortgaged property. The showing is that the taxes were paid by the mortgagor almost three weeks prior to the decree of dismissal. The plaintiff makes a counter showing that the payment was made by it and the mortgagor acting...