Source: https://supreme.justia.com/cases/federal/us/200/273/
Timestamp: 2019-04-21 20:40:48+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 200 › Gunter v. Atlantic Coast Line R. Co.
A suit against state officers to enjoin them from enforcing a tax alleged to be in violation of the Constitution of the United States is not a suit against a state within the prohibition of the Eleventh Amendment.
While a state may not, without its consent, be sued in a circuit court of the United States, such immunity may be waived, and if it voluntarily becomes a party to a cause and submits its rights for judicial determination, it will be bound thereby.
An appearance "for and on behalf of the state" by the Attorney General, pursuant to statutory provisions, in an action brought against county officers but affecting state revenues, in this case amounted to a waiver by the its immunity from .suit, and such immunity could not be invoked in an ancillary suit subsequently brought against the successors of the original defendants to enforce the decree.
A decree of the circuit court of the United States having jurisdiction of the cause and in which the state appeared that a charter exemption existed in favor of a railroad company by virtue of a contract within the meaning of the impairment of obligation clause of the federal Constitution is binding upon the state as to the existence and effect of the contract during the period of exemption, and the rule that a decree enjoining the collection of a tax is not res judicata as to the right to collect for a subsequent year does not apply.
the United States in administering relief where it is action in a matter ancillary to a decree rendered in a cause over which it had jurisdiction; nor is a circuit court debarred from enforcing its decree by ancillary suit in equity restraining improper prosecutions of actions in the state courts because there is an adequate remedy at law by interposing defense in those actions. The rule that the collection of a tax should not be enjoined unless the amount admitted to be due is tendered does not apply where the amount due is for a period not covered by the injunction or affected by the decree.
Before analyzing the facts particularly bearing upon the legal questions for decision, in order to a comprehension of those questions, we summarize, in their chronological order, matters which are undisputed concerning the origin and development of this controversy.
The Legislature of South Carolina, in 1855, exempted the capital stock and property of the Northeastern Railroad Company from all taxation during its charter existence. In 1849, the Cheraw & Darlington Railroad Company was chartered by legislative act, and, by an amendment to the charter, adopted in 1863, the last-named company was endowed with all the powers, rights, and privileges granted by the charter of the Northeastern Railroad Company, it being besides provided that the charter should not be subject to the provisions of a general law reserving the right to repeal, alter, and amend except where otherwise specially provided.
complained of, and hence the decree below was affirmed. Humphrey v. Pegues, 16 Wall. 244.
For at least twenty-five years following the decision in the Pegues case, no attempt was made to tax the property of the Cheraw & Darlington Railroad Company. In the year 1897, an act was passed directing the Attorney General to proceed to test the right of any railroad company to exemption, and, under this act, that official sued the Cheraw & Darlington Railroad Company to recover $134,000, the sum of taxes, penalties, and interest for a period of twenty years on the alleged ground that the company had been mistakenly treated as having a contract of exemption. The supreme court of the state, however, without passing upon the question of exemption, decided that the right to recover did not obtain because, in any event, an assessment against the railroad, as provided by law, was a prerequisite to the levy and collection of taxes.
From a statement made in the argument of counsel it is to be deduced that, during the year 1898 the capital stock and property of the Cheraw & Darlington Railroad Company was acquired by the Atlantic Coast Line Railroad Company of South Carolina, and, as the result of a charter granted to that company by the State of South Carolina, in 1898, it is conceded that the property formerly belonging to the Cheraw & Darlington Railroad Company became taxable, and that the state has, since that time, levied and collected the taxes due on the property. It is, moreover, conceded that the appellee on this record, the Atlantic Coast Line Railroad Company, a Virginia corporation, acquired in 1900 the property of the Cheraw & Darlington Railroad Company, as the successor of the South Carolina corporation which bore the same name.
"which has been off the tax books for the years in which they have been off the books, and to fix the time when such taxes shall become due, and for the collection thereof."
created a board to make the assessment to which it referred, limited the taxes to be imposed to ten years back, provided that the assessment made by the board should be put upon the rolls separately for each of the back years, and that there should be levied upon such assessment state and county taxes for the years to which the back assessment related. The act caused the taxes for which it provided to become a lien against the property upon which they might bear, and directed a certification of the taxes as assessed and levied to the respective county treasurers, and made it their duty to collect the same. To this end, such treasurers were directed to make a demand for payment upon the company in whose name the assessment was made, or, if it was found that the property assessed was "in the control of another company, demand should be made of the company . . . in possession of the property." By the act, in addition, the Attorney General was directed, if the back taxes assessed were not paid within sixty days after demand, to bring a suit in the name of the state, with the cooperation of such counsel as the counties might employ, to enforce the collection of the back taxes against the company in whose name they were assessed, or against the company found in possession of the property assessed.
case, and be accorded the benefit of the injunction issued in that case, and to that end that the Attorney General of the state and his associate counsel be enjoined from further prosecution of the actions commenced in the state courts in the name of the state, to enforce payment of the taxes, and that the respective county treasurers be enjoined from any further attempt to collect such taxes.
"by suit or otherwise, of any sum or sums of money which may be due or charged for taxes on said property of the Cheraw & Darlington Railroad Company after said eighteenth day of July, 1898 at which date it was admitted in argument the exemption established in Humphrey v. Pegues was surrendered."
This appeal was then taken.
Although the errors assigned on the record are seventeen in number, in the argument at bar but six contentions were relied upon, and we shall therefore confine ourselves to their consideration.
of by determining first whether all the defendants on this record, including the state, through its Attorney General, were parties or privies to the decree in the Pegues case; second, if they were, whether the decree in that case concluded against them the want of power to impose or collect the taxes in controversy; and, third, if it did so conclude them, whether the court below erred in granting the relief which it awarded.
First. We at once treat as undoubted the right of the Atlantic Coast Line Railroad Company to the benefits of the decree in the Pegues case, since it is conceded in the argument at bar that that company, as the successor to the rights of Pegues, is entitled to the protection of the original decree rendered in his favor.
On the face of the record in the Pegues case, the nominal defendants were the treasurers of the Counties of Chesterfield and Darlington, in which counties the property of the railroad was situated. Those now holding the office of treasurer in each of the named counties are among the parties on this record, with the addition of the Treasurer of Florence County, which county, as we have stated, consists of territory embraced in Chesterfield or Darlington County at the time of the entry of the Pegues decree. That, under these circumstances, the defendant treasurers, as the successors in office of the officials who were parties to the Pegues case, are privies to that decree is established. Prout v. Starr, 188 U. S. 537, 188 U. S. 544.
In deciding whether the state and its Attorney General were privies to the Pegues decree, some elementary propositions must be borne in mind.
a. In view of the prohibitions of the Eleventh Amendment to the Constitution of the United States, a state, without its consent, may not be sued by an individual in a circuit court of the United States.
"It is the settled doctrine of this Court that a suit against individuals for the purpose of preventing them, as officers of a state, from enforcing an unconstitutional enactment to the injury of the rights of the plaintiff is not a suit against the state within the meaning of that amendment."
And the subject was reviewed and restated in Prout v. Starr, 188 U. S. 537.
c. Although a state may not be sued without its consent, such immunity is a privilege which may be waived, and hence, where a state voluntarily become a party to a cause, and submits its rights for judicial determination, it will be bound thereby, and cannot escape the result of its own voluntary act by invoking the prohibitions of the Eleventh Amendment. Clark v. Barnard, 108 U. S. 436, 108 U. S. 447.
to judicial determination the question raised in the Pegues case concerning the alleged limitation of the taxing power of the state arising from the contract on that subject which was asserted in that case?
"These different enactments above mentioned being in force, the state officers of counties in South Carolina where the Cheraw & Darlington Railroad was situate, acting under the authority of the legislature of the state, imposed certain taxes on the stock and property of that company, and were proceeding to enforce payment of them when one Pegues, a stockholder in Mississippi, filed a bill in the court below, praying an injunction to restrain the collection."
The question, then, is narrowed to this: were the officers endowed with authority to stand in judgment for the state in suits brought against such officers wherein the validity of the taxes was assailed?
"for performing or attempting to perform any duty enjoined upon them by this act, the result of which action will affect the interests of the county, if decided in favor of the plaintiff in such action."
"if the state be interested in the revenue in said action, the county auditor shall immediately, upon the commencement of said action, inform the Auditor of State of its commencement of the alleged cause thereof, and the Auditor of State shall submit the same to the Attorney General, who shall defend said action for and on behalf of the state."
"the duty of the Attorney General of the state to defend any suit or proceedings against any tax collector or other officer who shall be sued for moneys collected, or property levied on, or sold on account of any tax, when the state auditor shall have ordered such collector to proceed in the collection of any such tax, . . . and any judgment against such collector or officer finally recovered shall be paid in the manner provided in section 81 of the act to provide for the assessment and taxation of the property aforesaid,"
that is, section 81 of the act of 1868. Now by that section, where a judgment passed against a county official concerning state taxes which had been paid, the state was, in effect, made liable for the amount of the judgment. Thus, in such a case, as in cases provided for in section 137 of the act of 1868, the state, through its officials, was made the real defendant.
If there were doubt -- which we think there is not -- as to the construction which we give to the act of 1868, that doubt is entirely dispelled by a consideration of the contemporaneous interpretation given to the act by the officials charged with its execution, by the view which this Court took as to the real party in interest on the record in the Pegues case, and by the action as well as nonaction which followed the decision of that case by the state government in all its departments through a long period of years.
"The state contends that the privileges thus granted were limited to those conferred upon the Northeastern by its original charter or act of incorporation, passed in 1851."
repudiating the conduct of the governor and the Attorney General in the defense of the Pegues suit for and on behalf of the state, and when, besides, we take into account the failure of the state government, in all its departments, for more than twenty-five years following the decision of the Pegues case, to assert any right to tax in conflict with the contract exemption which the Pegues decree sustained, the binding efficacy of the decree in that case upon the State of South Carolina seems to us beyond the reach of serious controversy. Indeed, we are not left to conjecture that the inaction of the state was the result of what was deemed to be the conclusive effect on the State of the Pegues decree, since it is shown that, in one or two instances after that decree was rendered, where preliminary steps were taken by the taxing officials of the state to impose taxes on the property of the railroad, such efforts were at once abandoned in consequence of the advice of attorneys general of the state that the decree in the Pegues case was conclusive, and the property could not be taxed.
Concluding, as we do from the terms of the act of 1868, that the officers who were named as defendants in the Pegues case were, for the purpose of that litigation, the agents voluntarily appointed by the state to defend its rights and submit them to judicial determination, we content ourselves with saying that it is unnecessary to review the case of State v. Corbin, 16 S.C. 533, and other decisions of the Supreme Court of South Carolina pressed upon our attention, since those cases did not involve the statute of 1868 or statutes of like import. And, moreover, we must not be understood as holding that other provisions of the law of South Carolina, relied upon in argument, would be inadequate to bind the state by the action of its Attorney General if the provisions of the act of 1868 did not exist. Into that consideration we have not entered.
Second. The State of South Carolina and its Attorney General and his associate counsel as the agents of the state being therefore privies to and bound by the decree in the Pegues case, we must determine what was concluded by that decree.
That the issue in the case was the existence of a charter exemption from taxation in favor of the Cheraw & Darlington Railroad Company and the consequent want of power of the state to tax the property of the railroad during the continuance of the exemption is obvious. And that the decree rendered in the cause established the exemption embraced in the issues is also obvious. This being true, it unquestionably follows that the decree established as to the parties and their privies the very question in issue in this proceeding. Escape from this inevitable result is sought to be accomplished by several propositions, all of which we think are unsound.
rights protected by the Constitution of the United States. Deposit Bank v. Frankfort, 191 U. S. 499.
b. It is urged that, as the taxes the collection of which the court enjoined were not for the same years as were the taxes with which the Pegues case was concerned, the Pegues decree was therefore not res judicata, because it related to a different cause of action. This rests upon the assumption that a decree enjoining the collection of a tax for one year can never be the thing adjudged as to the right to collect taxes of a subsequent year. But the proposition entirely disregards the fact that the decree in the Pegues case enjoining the collection of the taxes in controversy in that case was rested upon the ground that there was a contract protected from impairment by the Constitution of the United States which was as controlling on future taxes as it was upon the particular taxes to which the Pegues suit related. The contention therefore simply asserts that a contract right of exemption was beyond the pale of judicial protection because rights under such contract could never be sanctioned by final judicial action. Besides, the proposition is not open to controversy. New Orleans v. Citizens' Bank, 167 U. S. 371; Deposit Bank v. Frankfort, supra.
1793, whilst the Eleventh Amendment was in process of formation in Congress for submission to the states, and long therefore before the ratification of that amendment. The restrictions embodied in the section were therefore but a partial accomplishment of the more comprehensive result effectuated by the prohibitions of the Eleventh Amendment. Both the statute and the amendment relate to the power of courts of the United States to deal, against the will and consent of a state, with controversies between it and individuals. None of the prohibitions, therefore, of the amendment or of the statute relate to the power of a federal court to administer relief in causes where jurisdiction as to a state and its officers has been acquired as a result of the voluntary action of the state in submitting its rights to judicial determination. To confound the two classes of cases is but to overlook the distinction which exists between the power of a court to deal with a subject over which it has jurisdiction and its want of authority to entertain a controversy as to which jurisdiction is not possessed. From this it follows that, as in the Pegues case, the court had acquired jurisdiction, with the assent of the State of South Carolina, to determine as to it the controversy presented in that case the right of the court to administer relief -- to make its decree effective -- cannot be measured by constitutional or statutory provisions relating to original proceedings where jurisdiction over the controversy did not obtain. In other words, the proposition relied upon is disposed of by the conclusion which we have previously expressed concerning the persons who were parties and privies to the decree rendered in the Pegues case. Indeed, the proposition that the Eleventh Amendment or section 720 of the Revised Statutes controls a court of the United States in administering relief, although the court was acting in a matter ancillary to a decree rendered in a cause over which it had jurisdiction, is not open for discussion. Dietzsch v. Huidekoper, 103 U. S. 494; Prout v. Starr, 188 U. S. 537; Julian v. Central Trust Co., 193 U. S. 93, 193 U. S. 112.
below erred in enforcing its prior decree because there was adequate remedy at law, by interposing a defense in the state courts to the actions brought by the Attorney General. That question was foreclosed by the decree in the Pegues case. So also does the reasoning dispose of the assertion that, because a part of the tax for the year 1898 may have been due, therefore tender should have been made before invoking the power of the court to protect its jurisdiction and enforce the prior decree. The amendment of the decree made by the court eliminated from the controversy all question concerning the portion of the tax not covered by the decree in the Pegues case. Having acquired by that decree a right which the petitioner was entitled to enforce, whatever might have been the rule of tender as applied to other cases, that rule could not rightly be invoked to deprive the court below, as a court of equity, of the power to protect the petitioner in the enjoyment of rights previously secured under a decree of the court.

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