Source: https://supreme.justia.com/cases/federal/us/326/620/
Timestamp: 2019-04-26 16:38:47+00:00

Document:
1. Under the Declaratory Judgment Act, Judicial Code § 274(d), a federal district court has jurisdiction to entertain a suit for the purpose of determining the validity of a state tax assessment under the due process and equal protection clauses of the Fourteenth Amendment where the constitutional rights of the complainant cannot be protected adequately by proceedings in the state courts. Great Lakes Dredge & Dock Co. v. Huffman, 319 U. S. 293, differentiated. Pp. 326 U. S. 622-624.
2. Where a taxpayer who has been singled out for discriminatory taxation may not obtain equalization under the state law by reduction of his own assessment, but is restricted to proceedings against other members of his class for the purpose of having their taxes increased, the state remedy is not adequate to protect his rights under the Fourteenth Amendment. P. 326 U. S. 623.
3. A taxpayer brought suit in a federal district court for a declaratory judgment to determine the validity of a state tax assessment under the due process and equal protection clauses of the Fourteenth Amendment. There was uncertainty concerning the meaning of the local law. He could have appealed originally to the state board of tax appeals, but that board had no right to pass on constitutional questions. Its judgments could be reviewed by the state supreme court by certiorari, but the allowance of such a writ was discretionary. The refusal of a writ of certiorari by the state supreme court could not be judicially reviewed by the state court of errors and appeals. When the district court ruled on a motion to dismiss, the time for appeal to the state board of tax appeals had expired. When the district court rendered judgment, there had been a recent authoritative interpretation of the local law by the state court.
(a) There was such uncertainty surrounding the adequacy of the state remedy as to justify the federal district court in retaining jurisdiction of the cause. P. 326 U. S. 625.
conformity with the state statute. Spector Motor Co. v. McLaughlin, 323 U. S. 101, differentiated. Pp. 326 U. S. 626-629.
4. This Court is unable to say that the district court and the circuit court of appeals erred in applying to this case the rule of Duke Power Co. v. State Board, 129 N.J.L. 449, 131 N.J.L. 275, which involved closely analogous facts. P. 326 U. S. 629.
Certiorari, post, p. 704, to review affirmance of a judgment of a district court, 56 F.Supp. 41, denying a motion to dismiss and declaring certain state tax assessments to be null and void.
reason of diversity of citizenship and the allegation that the taxing authorities had consistently, systematically, and intentionally singled out respondent for discriminatory treatment in the assessment of taxes for which she was without remedy under the laws and decisions of New Jersey. It was prayed that the assessments be declared invalid as in contravention of the due process and equal protection clauses of the Fourteenth Amendment and of the provisions of applicable New Jersey statutes to which we will later refer. The District Court denied a motion to dismiss and gave judgment for respondent. 56 F.Supp. 41. The Circuit Court of Appeals, affirmed. 149 F.2d 617. The case is here on a petition for a writ of certiorari which we granted because the asserted conflict of that decision with Great Lakes Dredge & Dock Co. v. Huffman, 319 U. S. 293, raised an important problem concerning the relationship between the federal courts and state taxing authorities.
Sec. 267 of the Judicial Code, 28 U.S.C. § 384, provides that suits in equity shall not be sustained in the federal courts "in any case where a plain, adequate, and complete remedy may be had at law." That principle has long been recognized as having "peculiar force" in cases where the federal courts were asked to enjoin the collection of a state tax. Matthews v. Rodgers, 284 U. S. 521, 284 U. S. 525, and cases cited.
"The scrupulous regard for the rightful independence of state governments which should at all times actuate the federal courts, and a proper reluctance to interfere by injunction with their fiscal operations, require that such relief should be denied in every case where the asserted federal right may be preserved without it."
It was against that background that we held in Great Lakes Dredge & Dock Co. v. Huffman, supra, that the policy which led federal courts of equity to refrain from enjoining the collection of allegedly unlawful state taxes should likewise govern the exercise of their discretion in withholding relief under the Declaratory Judgments Act.
The Circuit Court of Appeals fully recognized the principle of the Huffman case, but concluded that the state procedure was not "speedy, efficient or adequate" to protect the federal right against discriminatory state taxation. It is around that conclusion that the first phase of this controversy turns.
". . . the county boards are required to secure taxation of all property at its true value, so that the fact that the property of A. is assessed at its true value, and the property of other taxpayers within the same district is assessed below its true value, affords A. no ground for demanding a reduction of his valuation, though it does entitle him to apply for an increase in the valuation of the others."
76 N.J.L. pp. 404-405. On the basis of that rule, it is plain that the state remedy is not adequate to protect respondent's rights under the federal Constitution.
courts. There is, however, a two-fold difficulty with that position.
of right, but purely discretionary. [Footnote 4] And the refusal of a writ of certiorari by the Supreme Court may not be judicially reviewed by the Court of Errors and Appeals. [Footnote 5] Accordingly, we conclude that there was such uncertainty surrounding the adequacy of the state remedy as to justify the District Court in retaining jurisdiction of the cause. While the charges of discrimination in the complaint were denied, the jurisdiction of the District Court is determined by the allegations of the bill (Hart v. B. F. Keith Vaudeville Exchange, 262 U. S. 271), which here were substantial.
The assessment was set aside as not being in conformity with the statute. And it was held that the remedial statutes, [Footnote 7] designed to cure irregularities in assessing or levying taxes, "do not apply where the statute for the addition of property omitted from the assessment is not complied with." 129 N.J.L. p. 457.
Petitioner argues that it is clear from Duke Power Co. v. State Board, supra, that respondent had a remedy in the state tribunals for failure of petitioner to follow the procedure required by the New Jersey statutes, and that the federal court should have required her to pursue it.
before the District Court rendered judgment, [Footnote 11] gave an authoritative interpretation of the local law. Hence, the reason for holding the case in Spector Motor Service, Inc. v. McLaughlin, supra, and remitting the complainant to the state courts for determination of the local law question no longer was existent here.
It follows a fortiori that the bill should not have been dismissed. As stated in Greene v. Louisville & I. R. Co., 244 U. S. 499, 244 U. S. 520, "A remedy at law cannot be considered adequate so as to prevent equitable relief unless it covers the entire case made by the bill in equity." Though the availability of a state remedy on the local law question be assumed to exist, so much uncertainty surrounds the New Jersey remedy to protect the taxpayer's federal right that a refusal to dismiss the bill was a proper exercise of discretion. Thus, however the case may be viewed, the exceptional circumstances which we have noted take it out of the general rule of Great Lakes Dredge & Dock Co. v. Huffman, supra. The District Court therefore properly proceeded to decide the case on the merits. That it placed its decision on local law grounds is not objectionable. For it is well settled that, where the federal court has jurisdiction, it may pass on the whole case and, agreeably with the desired practice, decide it on local law questions, without reaching the constitutional issues. Siler v. Louisville & N. R. Co., 213 U. S. 175, 213 U. S. 191-193; Greene v. Louisville & I. R. Co., supra, p. 244 U. S. 508; Chicago Great W. R. Co. v. Kendall, 266 U. S. 94, 266 U. S. 97-98; Risty v. Chicago, R.I. & P. R. Co., 270 U. S. 378, 270 U. S. 387; Waggoner Estate v. Wichita County, 273 U. S. 113, 273 U. S. 116; Hurn v. Oursler, 289 U. S. 238, 289 U. S. 243-248.
precedent on the local law question on which the decision below turned. On such questions, we pay great deference to the views of the judges of those courts "who are familiar with the intricacies and trends of local law and practice." Huddleston v. Dwyer, 322 U. S. 232, 322 U. S. 237. We are unable to say that the District Court and the Circuit Court of Appeals erred in applying to this case the rule of Duke Power Co. v. State Board, which involved closely analogous facts.
The assessments call for tax payments of nearly $7,000,000 for each year, as compared with the Township's budget of something like $97,000 annually. Prior to these assessments, the net assessed valuation for taxation of all property assessed, both real and personal, in the township amounted to $3,117,863 for 1940 and $3,139,020 for 1941. The resulting tax rate was 3.12 percent for 1940 and 3.10 percent for 1941. The additional assessments against respondent apparently would have increased the valuation of the township tax ratables by $221,940,438 for each of the two tax years, though it would not have affected the tax rates for those years.
State v. Collector of Randolph Tp., 25 N.J.L. 427, 431; State v. Taylor, 35 N.J.L. 184, 189; State v. Koster, 38 N.J.L. 308; State v. Segoine, 53 N.J.L. 339, 340, 21 A. 852, aff'd, 54 N.J.L. 212, 25 A. 963; Central R. Co. v. State Board, 74 N.J.L. 1, 65 A. 244; Royal Mfg. Co. v. Board of Equalization, 76 N.J.L. 402; 78 N.J.L. 337; Pennsylvania Coal Co. v. Saddle River, 96 N.J.L. 40, 43, 114 A. 157.
Duke Power Co. v. Hillsborough Township, 26 A.2d 713, 717, 20 N.J.Misc. 240, 243, reversed on another point, Duke Power Co. v. State Board of Tax Appeals, 129 N.J.L. 449, 30 A.2d 416; Schwartz v. Essex County Board, 129 N.J.L. 129, 132, 28 A.2d 482, 484, aff'd, 130 N.J.L. 177, 32 A.2d 354.
Staubach v. Cities Service Oil Co., 130 N.J.L. 157, 31 A.2d 804.
"On the written complaint of the collector, or any taxpayer of the taxing district or of the governing body thereof, that property specified has been omitted in the assessment, the county board, on five days' notice in writing to the owner by the party complaining, and after due examination and hearing, may enter the omitted property on the duplicate by judgment rendered within ten days after the hearing, a transcript whereof shall be furnished by the board to the collector, who shall amend his duplicate accordingly."
"If property in a taxing district is omitted by the assessor, it must be added to the assessment before April 1st. Its addition decreases the amount of taxes to be raised, since the ratables are thereby increased. The taxpayer is not embarrassed. He knows he will have a tax to pay, and is liable anyway even if the property was not included in the assessment. However, if property is added to the assessment after the rate has been fixed, it gives rise to a municipal windfall. There is no harm in this if there were due notice and a fair hearing by the county board and a judicial determination by it."
"No tax, assessment or water rate imposed or levied in this state shall be set aside or reversed in any action, suit, or proceeding for any irregularity or defect in form, or illegality in assessing, laying or levying any such tax, assessment or water rate, or in the proceeding for its collection if the person against whom or the property upon which it is assessed or laid is, in fact liable to taxation, assessment or imposition of the water rate, in respect to the purposes for which the tax, assessment or rate is levied, assessed or laid."
"The court in which any action, suit or proceeding is or shall be pending to review any such tax, assessment or water rate shall amend all irregularities, errors, or defects, and may, if necessary, ascertain and determine the sum for which the person or property was legally liable and, by order or decree, fix the amount thereof. The sum so fixed shall be the amount of tax, assessment, or water rate for which the person or property shall be liable."
"the remedial statutes we do not find to have been a substitute for proper assessment. Their application has been only in instances where properly has been omitted by the assessor or has been assessed in the name of one other than the true owner."
Ninety days are allowed. State Board of Tax Appeals, Rule V(c), CCH. Corp. Tax Serv. par. 89-505. The resolutions of the County Board attempting to make the assessments were entered June 26, 1941.
The present bill was filed in July, 1941, the answer in September, 1941, and the motion to dismiss in November, 1941. The order denying the motion to dismiss was made in August, 1942.
It seems that, under certain circumstances, certiorari to the Supreme Court may be had in lieu of an appeal to the State Board of Tax Appeals. It was held in Schwartz v. Essex County Board, supra, note 3 that lack of jurisdiction of the county board or irregularity in its proceedings may be tested by certiorari. 130 N.J.L. p. 178. And see State v. Clothier, 30 N.J.L. 351. But, as we have seen, note 4 supra, it is a discretionary writ.
That case was decided by the Court of Errors and Appeals on March 9, 1944. The present case was decided by the District Court on July 14, 1944.

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