State Life Ins. Co. v. Daniel

• Decision Date: 11 May 1934
• Docket Number: No. 1359.,1359.
• Parties: STATE LIFE INS. CO. v. DANIEL et al.
• Court: U.S. District Court — Western District of Texas

6 F. Supp. 1015

STATE LIFE INS. CO. v. DANIEL et al.

No. 1359.

District Court, W. D. Texas, Austin Division.

May 11, 1934.

Charles F. Coffin, of Indianapolis, Ind., and Hart, Patterson & Hart, of Austin, Tex., for plaintiff.

James V. Allred, Atty. Gen. of Texas, and Sidney Benbow, Asst. Atty. Gen. of Texas, for defendants.

McMILLAN, District Judge.

In this case the plaintiff, the State Life Insurance Company, by amended original petition, complains of R. L. Daniel, acting as commissioner of insurance of the state of Texas, Charles Lockhart, acting as treasurer of the state of Texas, and James V. Allred, acting as Attorney General of the state of Texas. Plaintiff alleges that it is a life insurance corporation chartered under the laws of the state of Indiana, and a citizen of that state; that the defendants are, each and all of them, citizens of the state of Texas, and reside in Travis county in that state. Plaintiff sues for the purpose of recovering the sum of $5,450.87 which it alleges it paid to the commissioner of insurance by reason of an illegal exaction made on it under the color of article 4769 of Vernon's Annotated Civil Statutes, Revision of 1925, providing, substantially, for the payment of an occupation tax equal to 3 per cent. of the gross premiums collected from the citizens of the state of Texas. It is further alleged that this money was paid under protest and that same has been and is now being held in a certain "suspense account" provided for by the laws of Texas, awaiting the determination of the title thereto as provided by said suspense statute.

At the threshhold the plaintiff is met by a plea in abatement which raises the question of the jurisdiction of this court to hear and determine the matter, and it is the matter of this preliminary plea to the jurisdiction which is now before the court for determination.

The point which the defendants rely on to sustain their contention is, that while the suit is nominally brought against them in their various capacities as officers of the state, the case is in truth and in fact one against the state of Texas itself; that while permission is given by the suspense statute, as will be hereinafter noted, to institute a suit of this character, the effect of the asserted fact that the suit is against the state is to confine the litigation to the state courts, this result necessarily following by reason of the fact that there is no diversity of citizenship if the state is really the party at interest.

It is apparent upon the face of the pleadings that the necessary jurisdictional amount is involved and that complete diversity of citizenship exists, unless the defendants' contention that the state is the real party defendant is correct. It is fundamental, of course, that the state cannot be sued without its consent. Even though its consent be given, no one disputes the proposition that it is not a citizen within the contemplation of the diversity of citizenship provision of the Judicial Code (section 24 28 USCA § 41). State of Minnesota v. Northern Securities Co., 194 U. S. 48, 24 S. Ct. 598, 48 L. Ed. 870; State Highway Commission of Wyoming v. Utah Construction Co., 278 U. S. 194, 49 S. Ct. 104, 73 L. Ed. 262; Utah Construction Company v. State Highway Commission (D. C.) 16 F.(2d) 322.

Accordingly, the matter hinges here upon the question as to whether this is in truth and in fact a suit against the state of Texas, or whether it is against officers of the state who have made an illegal exaction of the plaintiff under the color of their official positions.

To arrive at a proper determination of this matter consideration must be given not only to the general principles announced by the federal courts, but to the so-called suspense statutes of the state of Texas. As early as 1930, the Legislature of the state, by amendatory statute (Acts Tex. 1930, 5th Called Sess., c. 73, § 3), provided for the holding in suspense of any moneys paid under protest until the exact status of the same was determined. The statute was couched in very general terms, and questions early arose as to its sufficiency to accomplish the desired purpose. Thereafter, in 1931 (Vernon's Ann. Civ. St. Tex. art. 4388), this statute was amended and amplified. The question as to its sufficiency still remaining, in 1933 a much more complete statute was passed, which became effective on June 7th of that year. This statute is covered by article 7057b, Vernon's Ann. Civ. St. Tex., and, so far as the same is pertinent to the matter at issue here, it is copied in the footnote.¹

It will be observed from a casual reading of this act that the state, taking notice of the fact that taxpayers were being required by officers of the state to make payments which they believed to be unlawful, desired to effect an arrangement by which payments could be made without waiver, the right being accorded to institute suit within ninety days against the officer who made the collection and the Attorney General and the treasurer for the purpose of determining the validity of the exaction. Pendente the final adjudication of the matter, the fund is to be held in suspense by the state treasurer, and should it finally be determined that the money belongs to the state, it is to be covered into the state treasury, and should it finally be determined to belong to the taxpayer, it is to be returned to him with pro rata interest earned.

It will be noted that provision is made for suit in any court of competent jurisdiction in Travis county, Tex., the statute making no provision as to whether the court should be state or federal, as distinguished from statutes in which other states have required litigation of this kind to be brought only in the state courts.

Plaintiff in the present case has sought to avail itself of the provisions of this act by paying this occupation tax under protest and bringing this suit against the proper officers in Travis county, Tex., within the required ninety days. It has long been settled that suits against state officers attempting to enforce an unconstitutional statute or attempting to enforce a valid statute in an illegal manner are not suits against the state. Reagan v. Farmers' Loan & Trust Co., 154 U. S. 362, 14 S. Ct. 1047, 38 L. Ed. 1014; Ex parte Young, 209 U. S. 159, 28 S. Ct. 441, 52 L. Ed. 714, 13 L. R. A. (N. S.) 932, 14 Ann. Cas. 764; Greene v. Louisville & Interurban R. R. Co., 244 U. S. 499, 37 S. Ct. 673, 61 L. Ed. 1280. In cases in equity where relief has been asked against state officers under these circumstances, this rule has been uniformly applied by the federal courts.

Accordingly, in this case had the plaintiff elected to maintain a bill in equity against these state officers to enjoin the collection of this tax, the bill could not have been resisted upon the ground it was a suit against the state, and, if the allegations were otherwise sufficient, would have been maintainable, unless it could have been defeated by the provisions of this recent suspense statute. It is the opinion of the court that it was the obvious purpose of this statute to avoid equity jurisdiction in cases of this character and to provide for the aggrieved taxpayer an adequate remedy at law. Even prior to the passage of the act of 1933, the Attorney General's department, in the case of Southern Realty Corporation v. McCallum (D. C.) 1 F. Supp. 614; Id. (C. C. A.) 65 F.(2d) 934, which finally found its way to the Supreme Court of the United States (Southern Realty Corporation v. Heath, 54 S. Ct. 127, 78 L. Ed. ___) contended that the earlier suspense statute constituted such adequate remedy at law as would defeat the right to appeal to a court of equity. This point was ruled against them by the lower court on the ground that the statute as it then existed was inadequate, particularly in view of the fact that it did not provide for a return of the money with interest. Southern Realty Corporation v. McCallum (D. C.) 1 F. Supp. 614. Had the statute provided an adequate remedy at law, it would have defeated the suit in equity, as is clearly shown by the decisions of the Supreme Court in the Matthews Case, 284 U. S. 521, 52 S. Ct. 217, 76 L. Ed. 447, and the Stratton Case, 284 U. S. 530, 52 S. Ct. 222, 76 L. Ed. 465.

Now an adequate remedy at law within the purview of federal procedure not only means an adequate remedy in the state courts but an adequate remedy in the federal courts as well. Arrowsmith v. Gleason, 129 U. S. 86, 9 S. Ct. 237, 32 L. Ed. 630; Smyth v. Ames, 169 U. S. 466, 18 S. Ct. 418, 42 L. Ed. 819; Risty v. Chicago, Rock Island & Pacific R. R. Co., 270 U. S. 378, 46 S. Ct. 236, 70 L. Ed. 641; Matthews v. Rodgers, 284 U. S. 521, 52 S. Ct. 217, 76 L. Ed. 447; City Bank Co. v. Schnader, 291 U. S. 24, 54 S. Ct. 259, 78 L. Ed. ___. Accordingly, it is perfectly obvious that if the contention of the Attorney General...