Wilson v. Kennedy

• Decision Date: 31 August 1954
• Docket Number: Civ. No. 27-54.
• Citation: 123 F. Supp. 156
• Parties: John WILSON, et al., Plaintiffs, v. B. L. KENNEDY, et al., Defendants.
• Court: U.S. District Court — District of Guam

123 F. Supp. 156

John WILSON, et al., Plaintiffs, v. B. L. KENNEDY, et al., Defendants.

Civ. No. 27-54.

District Court of Guam.

August 31, 1954.

Finton J. Phelan, Jr., E. R. Crain, Agana, Guam, for plaintiffs.

Howard D. Porter, Atty. Gen., Leon D. Flores, Island Atty., Agana, Guam, Louis A. Otto, Jr., Richard Rosenberry, Deputy Island Attys., for defendants.

SHRIVER, District Judge.

This matter is before the court on a motion to dismiss for failure to state a cause of action and lack of jurisdiction, and summary judgment as a matter of law filed by the defendants. The plaintiffs have moved for summary judgment. There are in the record briefs, requests for admissions of fact, objections and answers to such requests for admissions of fact, but in the view of the court the basic issues are clear and any detailed discussion will tend to complicate rather than clarify the issues.

The plaintiffs are two employers and two employees of different employers. Their complaint alleges that the defendants, acting without authority, required the plaintiffs and others similarly situated to pay income taxes which were used by the Government of Guam. The plaintiffs request a judgment to the effect that the defendants repay the taxes illegally collected, be enjoined from future illegal collections, and that a declaratory judgment be entered in effect holding that there is no effective territorial income tax law in Guam. The plaintiffs do not contend that if there is an effective income tax law, and if the defendants are the proper persons to collect that tax, that the plaintiffs have paid more than the law requires them to pay, nor do they contend that any amounts paid by them did not reach the Guam Treasury.

This case is a continuance of the so far abortive effort on the part of some taxpayers to avoid the payment of income taxes on income earned in Guam. The defendants are sued as individuals, but they are the former Commissioner of Revenue and Taxation for Guam, and the present Governor, Attorney General, and Director of Finance for Guam, respectively. In their official capacities they are charged with responsibility for tax collection, but there is no specific statute enacted by the Guam Legislature or by the United States Congress which authorizes them to levy and collect income taxes. Such authority, if it exists, must flow by necessary implication from the law creating the tax and the logical assumption that the United States Congress intended that the tax should be collected and used for the benefit of the Government of Guam. The pertinent provisions are Sections 30 and 31 of the Organic Act of Guam.¹

In an action for a declaratory judgment against the Government of Guam involving these provisions it was held that the Government of Guam has sovereign immunity from suit without its consent.² In that case the Court of Appeals pointed out that it offered no expression of opinion on the questions as to the right to sue a tax collector as agent of Guam; or the liability at common law of a tax collector as an individual, citing Great Northern Life Insurance Co. v. Read, 322 U.S. 47, 64 S.Ct. 873, 88 L.Ed. 1121.

Laguana v. Ansell³ brought before the court and answered many of the questions raised by these plaintiffs. In the Laguana case the issues were not, however, clouded by extraneous details. Laguana contended that Ansell had required his employer to withhold and pay income taxes which were exempt from taxation by the United States in the unincorporated territory of Guam within the meaning of Section 31. The United States intervened. It was conceded that if Section 31 created a territorial income tax to be collected by the proper officials of the Government of Guam, Laguana had no action. This court discussed at length the legislative history and precedents and held that the effect of Section 31 is to impose a territorial income tax to be collected by the proper officials of the Government of Guam. The Court of Appeals affirmed by per curiam opinion for the reasons given in the opinion of this court.

The Laguana case disposed of any question as to the imposition of the tax and the obligation to pay the tax to the proper officials of the Government of Guam. The plaintiffs in the instant case apparently contend, however, that there are no officials of the Government of Guam who have authority to collect the tax and that those officials who pretended to exercise such authority must repay the amounts collected. In the first place we must distinguish between Section 31, which makes the income tax laws in force in the United States of America, current and future, in force in Guam, and any authority the Guam Legislature may have to legislate in the field. The United States Congress as the parent legislative body made the "income tax laws" applicable. We are dealing with a law of the United States. In this complex field it would appear that the Congress intended to do more than just levy taxes. It intended that the taxpayer on Guam should be governed by the income tax laws in force in the United States at any given time. Like the taxes themselves, enforcement of collection must necessarily vary or change at the will of the Congress. If the Government of Guam has available facilities to carry out that will, a taxpayer can hardly be heard to complain that he would prefer some different system of collection. As early as 1935 the Treasury Department of the United States ruled in connection with a similar tax in the Virgin Islands⁴ that it will be necessary in some sections of the law (Revenue Act of 1934) to substitute the words "Virgin Islands" for the words "United States" in order to give the law proper effect in those islands, and it followed that precedent as regards Guam.⁵

The plaintiffs further complain that the Government of Guam has not...