Regents of University System of Georgia v. Page, 7784.

• Decision Date: 20 January 1936
• Docket Number: No. 7784.,7784.
• Parties: REGENTS OF UNIVERSITY SYSTEM OF GEORGIA v. PAGE.
• Court: U.S. Court of Appeals — Fifth Circuit

81 F.2d 577 (1936)

REGENTS OF UNIVERSITY SYSTEM OF GEORGIA v. PAGE.

No. 7784.

Circuit Court of Appeals, Fifth Circuit.

January 20, 1936.

Marion Smith and M. E. Kilpatrick, both of Atlanta, Ga., for appellant.

M. H. Eustace, Sp. Asst. to Atty. Gen., and M. Neil Andrews, Asst. U. S. Atty., of Atlanta, Ga., for appellee.

Before FOSTER and HUTCHESON, Circuit Judges, and HOLMES, District Judge.

HOLMES, District Judge.

This suit in equity was commenced in the District Court of Northern Georgia, by the Board of Regents of the University System of Georgia against the Collector of Internal Revenue, to restrain the collection of taxes upon the payment of admissions to athletic games, the proceeds of which inure wholly to the University of Georgia and the Georgia School of Technology, branches of said system. The appellant was created by an act of the Legislature of Georgia, in 1931 (Laws Ga. 1931, p. 20) for the purpose of having supervision of the public higher institutions of learning in the state, among which were said University and School. From the bill of complaint, its amendments, and exhibits, it appears that during the time involved in this controversy athletic games or exhibitions, participated in by students, were held upon the athletic fields of each of said institutions. The public was admitted to such contests upon payment of the prescribed price of admission; but whether the amount of admission tax imposed by section 500 of the Revenue Act of 1926, 44 Stat. 91, as amended by section 711 of the Revenue Act of 1932, 47 Stat. 271, was added to the price, is a disputed issue to be determined from the amended petition and its exhibits. Each admission ticket had printed on its face the price thereof, the amount of federal tax, and the total. The full amount shown on the face of each ticket was collected from the purchaser. On the back of each ticket was printed the following: "The University of Georgia, being an instrumentality of the government of the State of Georgia, contends that it is not liable for any admissions tax. The amount, stated as a tax is so stated because the University is required to do so by Treasury regulations pending a decision as to its liability in this respect. This amount is collected by the University as a part of the admission and will be retained as such unless it is finally determined that the University is itself liable for the tax," the same notice, except for the name "School of Technology," being placed on tickets of the School of Technology.

The Commissioner of Internal Revenue having ruled that state universities must collect the tax on admissions to football games, the appellant made a return of admissions so collected, paid an amount thereon as a tax to the collector for the proper district (such amount not being involved in the present suit), and then filed a claim for refund to cover the amount, but the claim was denied on the ground, among others, that the tax had not been imposed on the claimant, but on others from whom the admissions were collected, and that, not being the taxpayer, appellant could not contest the payment. Warrants of distress and notices of levy having been served by appellee upon the appellant for subsequent taxes, alleged to have been collected during the months of September and October, 1934, from the sale of admissions to games played at the University of Georgia and the School of Technology, and 10 per cent. of the amounts so collected and deposited in local banks having been levied upon by the collector, the appellant filed its bill praying that the appellee be restrained from proceeding further with said attempt to collect said taxes, for a declaratory judgment that no taxes were due, and for general relief.

The court below issued its rule to show cause why the relief prayed for in the bill should not be granted, to which appellee responded by filing a motion to dismiss the bill. This motion was sustained and a decree of dismissal followed, the court holding, as contended by appellee, that an injunction is prohibited by section 3224 of the Revised Statutes (26 U.S.C.A. § 1543); that the United States, which is the real party in interest, has not consented to the determination of the question involved by declaratory judgment or decree; that the promotion of athletic games where admission fees are charged is not an essentially governmental function; and that it was not necessary to decide whether the state could be required to act as agent to collect the tax since it had voluntarily done so.

The contentions of appellant are that it is a department of the state government, performing a sovereign function; that the University of Georgia and School of Technology have as parts of their educational curricula athletic departments for the instruction of their students in physical training and education; that the athletic events for which the public is charged admission, which include athletic contests between students of the University of Georgia, the School of Technology, and other colleges, are parts of their educational program; that all funds derived from the sale of such admissions are the property of appellant; and that such admissions are exempt from the payment of the federal admissions tax. The appellant further claims that the amounts for which warrants of distress have been issued are not for taxes assessed against a taxpayer, but for items of a debt owing by an alleged agent; that the money or chooses in action which have been levied upon by distraint are not the property of the taxpayer; that the United States government has no lien thereon and no right to seize it by summary process; and that section 3224 of the Revised Statutes does not apply because of the special circumstances which call peculiarly for the interposition of equitable remedies in order to avoid irreparable injury.

We think the court erred in holding that the appellant had voluntarily acted as agent of the federal government in collecting the taxes. If the appellant acted as agent, it did so under coercion brought about by the fear of being mistaken in its expressed opinion that it could not be required to collect taxes for the federal government, and that no taxes were due, because the exhibitions, admissions to which are sought to be taxed, were governmental functions of the state which the United States were without power to tax. The conduct of law-abiding citizens, relying upon constitutional rights but at the same time giving respectful though unwilling obedience to an act of Congress believed to be inapplicable or unconstitutional, should not be distorted into a voluntary assent to the very application of the statute which is being protested against and emphatically challenged. While vigorously denying at all times that any admission tax is due, the appellant first paid it and sought to recover it through administrative channels. This effort failed because the tax payable on admissions is an excise which is added to the price of admission and paid by the purchaser of the ticket. In the absence of a showing that the burden of the taxes was actually borne by it, appellant has no interest in the subject-matter of the controversy and cannot recover either by administrative claim for refund or action at law. United States v. Jefferson Electric Mfg. Co., 291 U.S. 386, 54 S.Ct. 443, 78 L.Ed. 859; Shannopin Country Club v. Heiner (D.C.) 2 F.(2d) 393; Lafayette Worsted Co. v. Page (D.C.) 6 F.(2d) 399, 400; Bunker Hill Country Club v. United States (Ct.Cl.) 9 F.Supp. 52; Wourdack v. Becker (C.C.A.) 55 F.(2d) 840, certiorari denied 286 U.S. 548, 52 S.Ct. 501, 76 L.Ed. 1285. The admission tax statute (44 Stat. 91, § 500, as amended) provides that the tax is "to be paid by the person paying for such admission." It further provides (44 Stat. 9, § 2) that "the term `taxpayer' means any person subject to a tax imposed by this Act."

The only other recourse, except the one followed by appellant, was to disregard the law as construed by administrative officers, and to fail or refuse to comply with it and regulations promulgated thereunder by the Commissioner of Internal Revenue. This would have involved financial hazards and risks of criminal prosecutions which no prudent, law-abiding citizen should be required to incur. See section 500 (d) of the Revenue Act of 1926, 44 Stat. 91; section 3176, Revised Statutes, as amended by section 1103 of the Revenue Act of 1926, 44 Stat. 112; section 619 (d) of the Revenue Act of 1928, 45 Stat. 878; sections 502 (d), 1114, and 1123 of the Revenue Act of 1926, 44 Stat. 93, 116, 121; and section 3184 of the Revised Statutes of the United States (26 U.S.C.A. § 1545). The most pertinent provisions thereof are the following:

Section 500 (d). "Whoever sells an admission ticket or card on which the name of the vendor and price is not so printed, stamped, or written, or at a price in excess of the price so printed, stamped, or written thereon, is guilty of a misdemeanor, and upon conviction thereof shall be fined not more than $100.00." 44 Stat. 91, 92.

Section 1114 (b). "Any person required under this Act to collect, account for and pay over any tax imposed by this Act, who willfully fails to collect or truthfully account for and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed by this Act or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined not more than $10,000, or imprisoned for not more than five years, or both, together with the costs of prosecution." 44 Stat. 116.

Section 1114 (f). "The term `person' as used in this section includes an officer or employee of a corporation or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs." 44 Stat. 116, 117.

The course taken by appellant seems to...