Singleton v. Mathis

• Decision Date: 27 December 1960
• Docket Number: 16562.,No. 16561,16561
• Citation: 284 F.2d 616
• Parties: J. W. SINGLETON, Appellant, v. Curtis R. MATHIS, Director of Internal Revenue for the State of Arkansas, Appellee. Charles A. STEWART, Appellant, v. Curtis R. MATHIS, Director of Internal Revenue for the State of Arkansas, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

284 F.2d 616 (1960)

J. W. SINGLETON, Appellant, v. Curtis R. MATHIS, Director of Internal Revenue for the State of Arkansas, Appellee.

Charles A. STEWART, Appellant, v. Curtis R. MATHIS, Director of Internal Revenue for the State of Arkansas, Appellee.

Nos. 16561, 16562.

United States Court of Appeals Eighth Circuit.

December 27, 1960.

Leonard L. Scott, Little Rock, Ark., made argument for appellants. Glenn F. Walther and Eichenbaum, Scott & Miller, Little Rock, Ark., were with him on the brief.

Louise Foster, Atty., Dept. of Justice, Washington, D. C., made argument for appellee. Chas. K. Rice, Lee A. Jackson and A. F. Prescott, Dept. of Justice, Washington, D. C., were with her on the brief.

Before WOODROUGH, VAN OOSTERHOUT, and MATTHES, Circuit Judges.

MATTHES, Circuit Judge.

These actions, separately brought, have the common objective of enjoining appellee, Director of Internal Revenue for the State of Arkansas, from assessing and collecting a $250 gaming tax on each of two pinball machines owned by appellant Stewart and rented by him to appellant Singleton.¹ The Director filed a motion to dismiss the complaint in each case, and upon due consideration the court granted the motions and dismissed the complaints for lack of jurisdiction. These appeals followed.

In summary, the complaints alleged that the "Nite Club" pinball machine, while having the characteristics of a gaming device as set out by Rev.Ruling 59-294, 1959-2 Cum.Bull. 340,² is to be used solely for amusement; that the "Lotta Fun" pinball machine does not possess any device for releasing free games or plays — that it is an amusement device which will not be used for gambling, and that each machine is subject only to the $10 tax; that Rev.Ruling 59-294 is illegal and void; that the action of the Director in attempting to collect the $250 tax on each machine is arbitrary and capricious; that if the machines are seized, plaintiffs will be deprived of revenue; that the action of the Director has caused and will continue to cause injury and economic loss to plaintiffs.

We have for determination the narrow question of whether these actions may be maintained, notwithstanding § 7421 of the 1954 Code, which expressly prohibits the maintenance of an action, with statutory exceptions not here pertinent, for the purpose of restraining the assessment or collection of any tax. Much litigation has been focused on this provision of the Internal Revenue Code. In what probably is regarded as the landmark case of Miller v. Standard Nut Margarine Co., 284 U.S. 498, at page 509, 52 S.Ct. 260, at page 263, 76 L.Ed. 422, the Supreme Court made this timely observation:

"Independently of, and in cases arising prior to, the enactment of the provision (Act of March 2, 1867, 14 Stat. 475) which became Rev.St. § 3224 (26 U.S.C.A. § 154), this court in harmony with the rule generally followed in courts of equity held that a suit will not lie to restrain the collection of a tax upon the sole ground of its illegality. The principal reason is that, as courts are without authority to apportion or equalize taxes or to make assessments, such suits would enable those liable for taxes in some amount to delay payment or possibly to escape their lawful burden and so to interfere with and thwart the collection of revenues for the support of the government. And this court likewise recognizes the rule that, in cases where complainant shows that in addition to the illegality of an exaction in the guise of a tax there exist special and extraordinary circumstances sufficient to bring the case within some acknowledged head of equity jurisprudence, a suit may be maintained to enjoin the collector." (Emphasis supplied.)

It would appear that in the many cases in which taxpayers have endeavored to restrain collection of a tax, the courts have consistently adhered to the rule laid down in the Miller case, that is, that not only must the element of illegality be present, but, additionally, there must exist special and extraordinary circumstances of sufficient importance to warrant court interference. See and cf. Kaus v. Huston, 8 Cir., 1941, 120 F.2d 183; Smith v. Flinn, 8 Cir., 1958, 261 F.2d 781, at page 785, where we cite seven cases in which it was found that unusual circumstances existed (opinion modified on petition for rehearing 264 F.2d 523); Missouri Valley Intercol. Ath. Ass'n v. Bookwalter, 8 Cir., 1960, 276 F.2d 365.³

When viewed in light of the foregoing rule, the allegations in the instant complaints are wholly insufficient to bring these cases within some "acknowledged head of equity jurisprudence." As in Missouri Valley Intercol. Ath. Ass'n v. Bookwalter, supra, and Kaus v. Huston, supra, plaintiffs do not attack the legality of the tax as such; their complaint is that they are not liable for it. And see, Martin v. Andrews, 9 Cir., 238 F.2d 552, at page 557, 65 A.L.R.2d 543:

"The mere illegality of the exaction is insufficient to justify a holding that the statute prohibiting such actions is inapplicable. This is true even though the asserted illegality is predicated upon a claim of unconstitutionality. (Citing Dodge v. Osborn, 240 U.S. 118 36 S.Ct. 275, 60 L.Ed. 557; Dodge v. Brady, 240 U.S. 122 36 S.Ct. 277, 60 L.Ed. 560; Bailey v. George, 259 U.S. 16 42 S.Ct. 419, 66 L.Ed. 816)."

Furthermore, as to the machine described in the complaints as "Nite Club" it appears that it has all the characteristics of the type of machine which falls within the ruling defining a "gaming device," and thus the question of Singleton's liability is certainly an issue.

However, irrespective of the question of Singleton's liability for the tax, we find that the allegations in the complaints wholly fail to satisfy the requirement of special or extraordinary circumstances. The naked averments that appellants will be deprived of revenue if the machines are seized and their business will be injured, and economic loss will result if the $250 tax is collected, are of insufficient qualitative force to merit serious consideration. See Kaus v. Huston, supra, 120 F.2d at page 185, where stronger circumstances were held insufficient. And the additional arguments, apparently presented to the trial court, though not pleaded, that payment of the tax would subject appellant Singleton to undesirable newspaper publicity, and "might jeopardize his beer license," are as stated by the trial court, "speculative and purely collateral," and which, in any event, are not of sufficient weight to justify the granting of equitable relief. Singleton's rights may adequately be protected through a suit for refund — or, obviously, he has the choice of simply not exhibiting the machines and thereby...