Wolkstein v. Port of New York Authority

Citation178 F. Supp. 209
Decision Date06 November 1959
Docket NumberCivil Action No. 824-59.
PartiesHarry W. WOLKSTEIN, Plaintiff, v. PORT OF NEW YORK AUTHORITY, Dana Latham, Commissioner of Internal Revenue, and Joseph J. Mayer, United States District Director of Internal Revenue, Defendants.
CourtUnited States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey


Emanuel Needle, Newark, N. J., for plaintiff.

Francis A. Mulhern, Newark, N. J., and Sidney Goldstein, New York City, for defendant Port Authority.

Chester A. Weidenburner, U. S. Atty., by Stewart Pollock, Asst. U. S. Atty., Newark, N. J., for defendants Latham, Commissioner, and Mayer, District Director.

WORTENDYKE, District Judge.

By his complaint in this action plaintiff, a resident and presumably a citizen of the State of New Jersey, asks this Court (1) to direct the United States Commissioner of Internal Revenue (Commissioner) to require (a) the Port of New York Authority (Authority) to file annual Federal income tax returns of and to pay Federal income taxes upon its revenues from certain alleged proprietary activities in which it is alleged to be engaged, and (b) holders of Authority bonds to pay Federal income taxes on interest received upon such bonds; (2) to direct Authority to file returns of its proprietary income and to pay Federal income taxes upon the net portion of such income; and (3) to restrain Authority from engaging in such proprietary activities, which plaintiff charges are ultra vires the Authority.

Although Joseph F. J. Mayer, United States District Director of Internal Revenue is named as a party defendant, no relief is prayed against him; and although plaintiff would have the Court direct the Commissioner to require holders of Authority bonds to pay income tax upon interest receipts upon such bonds, no bondholder is made a party defendant either in an individual capacity, or as a representative of bondholders as a class. Plaintiff alleges that he holds five one thousand dollar 4% bonds of the Authority, and that he is not required to pay income tax upon interest received from the bonds.

Prior to the filing of an answer, defendants have moved to dismiss the complaint, pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, 28 U.S.C., for (1) lack of jurisdiction over the subject matter of the suit; (2) lack of personal jurisdiction over Authority; and (3) failure to state a claim upon which relief can be granted. At the conclusion of the oral arguments upon them, these motions were granted. Thereafter, each of the parties requested the Court to embody its said decision in a written opinion. What follows here is in compliance with such requests.

Plaintiff asserts that this Court has jurisdiction to entertain this action by derivation from 28 U.S.C. § 1340 and Section 2 of Article III of the Constitution of the United States. He says that this is a case arising under a law of the United States, i. e., § 1340 of Title 28 of the United States Code, which provides:

"The district courts shall have original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue * * *."

The jurisdiction of this Court is a limited one, "depending upon either the existence of a federal question or diverse citizenship of the parties. Where these elements of jurisdiction are wanting, it cannot proceed, even with the consent of the parties." Byers v. McAuley, 1892, 149 U.S. 608, 618, 13 S.Ct. 906, 910, 37 L.Ed. 867.

It is obvious that jurisdiction of this civil action finds no support in diversity of citizenship between the parties. If reliance is placed upon the existence of a Federal question to support jurisdiction, the complaint fails to allege that the matter in controversy (if controversy exists) exceeds the sum or value of $10,000, exclusive of interest and costs, (although plaintiff pleads that it arises under a law of the United States). Therefore section 1331 of Title 28 cannot avail as a jurisdictional support. Plaintiff must stand or fall (and states he is content to do so) upon 28 U.S.C. § 1340 as his jurisdictional foundation.

Does this civil action arise under any Act of Congress providing for internal revenue? If the answer to this question is in the negative, this Court lacks jurisdiction of the case. If the question is answered affirmatively, under what Act of Congress does the action arise? A case does not arise under a law of the United States unless a right or immunity created by the law is an essential element of the plaintiff's cause of action. The right or immunity must be such that it will be supported if the law is given one construction or effect, and defeated if it receives another. "A genuine and present controversy, not merely a possible or conjectural one, must exist with reference thereto, * * * and the controversy must be disclosed upon the face of the complaint, unaided by the answer * * *. Indeed, the complaint itself will not avail as a basis of jurisdiction insofar as it goes beyond a statement of the plaintiff's cause of action and anticipates or replies to a probable defense." Gully v. First National Bank, 1936, 229 U.S. 109, 113, 57 S.Ct. 96, 97, 81 L.Ed. 70. What right or immunity created by what Act of Congress constitutes an essential element of plaintiff's alleged cause of action? The complaint does not answer this question beyond stating that the action arises under an Act providing for internal revenue. To what Act reference is made is not disclosed in the complaint, nor does plaintiff designate it in his brief. This action does not arise under any Act of Congress providing for internal revenue because no right or immunity of plaintiff, created by any such Act, has been shown to be an essential element of his pleaded causes of action. Plaintiff's alleged status as a bondholder of Authority and his implied status as a citizen and taxpayer of the United States afford no bases for inference that any right or immunity of his created by the internal revenue laws is an essential element of the causes of action which he alleges, or will be affected by the relief which he prays. Commonwealth of Massachusetts v. Mellon, 1922, 262 U.S. 447, 487, 43 S.Ct. 597, 67 L.Ed. 1078. See Murphy v. United States, 7 Cir., 1958, 252 F.2d 389, 394, citing Ex parte Levitt, 1937, 302 U.S. 633, 634, 58 S.Ct. 1, 82 L.Ed. 493; also Alabama Power Co. v. Ickes, 1937, 302 U.S. 464, 478, 58 S.Ct. 300, 82 L.Ed. 374, and Doremus v. Board etc. of Hawthorne, 1952, 342 U.S. 429, 433, 72 S.Ct. 394, 96 L.Ed. 475. Plaintiff's lack of status to maintain this suit and this Court's consequent lack of jurisdiction over the subject matter thereof is further emphasized by plaintiff's concessions (1) that he is not questioning nor requesting this Court to construe the validity of any Act of Congress, and (2) that he sues, not as a taxpayer, but as a "member of the public at large and as a bond holder" of Authority. As a bondholder of Authority plaintiff sues only in his own behalf not as representative of others. See F.R.C.P. 23. Although he charges Authority with activities which he asserts are ultra vires, he alleges no actual or threatened damage to himself as a creditor, but affirmatively pleads that he is required to pay no income tax upon his receipts of interest upon Authority's bonds. It is obvious that taxation of interest on Authority's bonds would be detrimental to plaintiff's interests. He does not complain of any competitive business advantage accruing to Authority by virtue of its tax-exempt status. Plaintiff seeks the singular objective of precluding Authority from engaging in activities productive of income out of which to pay principal and interest on its bonds, and of compelling Authority to pay taxes upon the very income of which it would thus be deprived.

In effect, the relief sought in this action against both Commissioner and Authority is in the nature of mandamus which this Court is without jurisdiction to afford. Covington and Cincinnati Bridge Co. v. Hager, 1906, 203 U.S. 109, 27 S.Ct. 24, 51 L.Ed. 111. See also Updegraff v. Talbott, 4 Cir., 1955, 221 F.2d 342. Grace Line, Inc. v. Panama Canal Co., 2 Cir., 1957, 243 F.2d 844, is distinguishable because plaintiff in the latter case had standing to seek relief by way of mandatory injunction. The civil action before us is essentially for the collection of taxes. This is prohibited "unless the Secretary or his delegate authorizes or * * * directs that the action be commenced." 26 U.S.C. § 7401. No such authorization, sanction or direction is shown. The present action may not be maintained. United States ex rel. Marcus v. Hess, 3 Cir., 1942, 127 F.2d 233, reversed on other grounds 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443, rehearing denied 318 U.S. 799, 63 S.Ct. 756, 87 L.Ed. 1163; Olson v. Mellon, D.C. Pa.1933, 4 F.Supp. 947, affirmed 3 Cir., 1934, 71 F.2d 1021. See also United States ex rel. Roberts v. Western Pacific R. Co., 9 Cir., 1951, 190 F.2d 243, certiorari denied 342 U.S. 906, 72 S.Ct. 298, 96 L.Ed. 678.

With regard to plaintiff's prayer for injunctive relief against alleged ultra vires activities of Authority, the absence of jurisdiction in this Court to afford such relief is conclusively established by the congressionally approved (Pub. Res. No. 17, 67th Cong., S.J.Res. 88, 42 Stat. 174) bi-state joint legislation creative of Authority, which provides that the two States who are parties to the compact withhold consent that Authority be sued in any action for injunction other than an action by the Attorney General of either of the States. Ch. 204, N.J.Laws 1951 (R.S. 32:1-157, 32:1-161, N.J.S.A.), and Ch. 301, N.Y.Laws 1950 (McK.Unconsol.Laws, §§ 6688, 6692). Moreover, the absence of Authority's consent to this suit leaves unimpaired its immunity therefrom as a joint agency of the States of New York and New Jersey. See Howell v. Port of New York Authority, D.C.N.J.1940, 34 F.Supp. 797; Rao v. Port of New York Authority, D.C. N.Y.1954, 122 F.Supp....

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