Source: http://supreme.nolo.com/us/72/720/case.html
Timestamp: 2019-04-24 01:53:49+00:00

Document:
1. The jurisdiction of the circuit court in a case between citizens of he same state, under the internal revenue laws of July 1, 1862, and March 3, 1863, removed thereto from a state court under the Act of March 2, 1833 (the Force Bill), and before the passage of the Internal Revenue Act of June 30, 1864, is saved by the sixty-eighth section of the Internal Revenue Act of July 13, 1866, if the justice of said circuit court is of opinion that the case would be removable from the state court to the circuit court under the sixty-seventh section of the said Act of July 13, 1866.
2. Where a case, removed from a state court to a circuit court under the act of 1833, above mentioned, would be clearly removable under the provisions of the act of 1866, directing such circuit court to remand removed cases unless the circuit judge should be of opinion that the same, if pending in the state court, would be removable under a provision which the last-named act made, the fact that the case was in the circuit court when the new act passed, and that it never was remanded, is a fact from which it may be inferred as a conclusion of law that it was the opinion of the circuit judge that the case was one that ought to be retained.
3. Where an article (as illuminating gas) which, under the internal revenue acts, is taxable when made and "sold," but is not taxable when made by the party "for his own use," is made by trustees appointed by the party using it under obligatory and fixed arrangements with such party's creditors, at an establishment of which the party using the article has apparently the ultimate ownership, but which, till certain debts due by him and contracted in order to build and enlarge the establishment are paid is held and managed exclusively by the trustees under an arrangement that the party using may have the article at a certain price and that all clear profits shall be set aside as a sinking fund for the payment of the principal due the creditors, such article, when furnished to the debtor at a price fixed, is "sold" and taxable, though apparently the sale is chiefly for the purpose of providing, in the manner agreed on, a sinking fund to pay the debts of the party using it.
furnished by them to the city to be used in her public lamps is liable to, and chargeable with, the internal revenue duty imposed by the Act of July 1, 1862, and the supplement thereto of March 3, 1863.
The Judiciary Act of 1789 limits the jurisdiction of the federal courts, so far as determined by citizenship, to "suits between a citizen of the state in which the suit is brought and a citizen of another state."
An act of 1833, [Footnote 1] "to provide further for the collection of duties on imports," extended the jurisdiction to cases arising under "the revenue laws of the United States" where other provision had not been made. And it authorized any person injured in person or property on account of any act done "under any law of the United States for the protection of the revenue or the collection of duties on imports" to maintain suit in the circuit court. It also allowed any person sued in a state court on account of any act done "under the revenue laws of the United States" to remove the cause by a mode which the act itself set forth into the circuit court of the United States.
With the passage of the internal revenue laws made necessary by the late rebellion, it was doubted by some persons whether this act of 1833 extended to cases under the new enactments. And the internal revenue act of 1864, [Footnote 2] by its fiftieth section extended in general words "the provisions" of the act of 1833 to cases arising under the internal revenue acts.
officer, on account of any act done under color of his office,"
"Provided that any case which may have been removed from the courts of any state under said fiftieth section to the courts of the United States shall be remanded to the state court from which it was so removed, with all the records relating to such cases, unless the justice of the circuit court of the United States in which such suit or prosecution is pending shall be of opinion that said case would be removable from the court of the state to the circuit court under and by virtue of the provisions of this act."
With the act of 1833 in force, but before the passage of any of the others, the City of Philadelphia, in October, 1863, sued in a state court the collector of internal revenue of the collection district to which the city belongs for a return of certain internal revenue taxes paid under protest, the city corporation (constructively) and the collector being citizens of the same state.
The collector assuming that the case was one arising "under the revenue laws of the United States" and that it was therefore within the act of 1833, removed it by the mode prescribed in that act of 1833 into the circuit court. This was in November, 1863. And the circuit court having been apparently of the same opinion as to the extent of operation of the act of 1833, tried the case twice, the first trial beginning in December, 1863 -- therefore, before the internal revenue act of 1864, having its fiftieth section, was passed. A new trial was had in October, 1864, and final judgment then given.
Works," for gas used by the city for its public lamps. Supposing jurisdiction to have existed in the circuit court, the question was whether this gas had been "made and sold" by the trustees to the city, or whether it had been made by the city through its appointees, the trustees, for itself. If the former, it was taxable under the provisions of the revenue acts, which taxed all gas "made and sold;" if the latter, it came within an exception which exempted articles made by any person "not for sale, but for his or their own use," and was not taxable.
"to keep the pledge entirely out of the hands of the borrowers (the city), and prevent the funds from being intermingled with other property of the city, and thus exposed to the hazards of expenditure for other objects than those to which it was exclusively designated."
for the support of works whose income paid the interest on, and provided a sinking fund for final redemption of its own "gas loans" held by various creditors.
The court below was of opinion that the gas was "made and sold," and that it was taxable.
judgment were for the defendant. Exceptions were duly taken by the plaintiffs, and they sued out the present writ of error. Defendant objects to the jurisdiction of the court, and insists that the writ of error should be dismissed and as that objection presents a preliminary question it will first be examined.
court when the last-named proviso was passed, and has never been remanded by the justice of the circuit court, it must be understood as a conclusion of law that it was his opinion that it ought to be retained in the circuit court. Want of jurisdiction, therefore, is not shown, although the parties, plaintiffs and defendant, are citizens of the same state.
3. Cases arising under the internal revenue laws, as now modified, if commenced in a state court, against an officer appointed or acting under those laws, or against persons acting under such an officer, may be removed on petition of the defendant into the circuit court for the district, and the jurisdiction of the circuit court over such controversies, when all the prescribed conditions for the removal concur in the case, is clear beyond doubt, irrespective of the citizenship of the parties.
Although the point was not made in this case, it seems proper to remark that the jurisdiction of the circuit court has often been denied in this class of cases, because the party aggrieved may appeal to the commissioner for redress and because he may also pursue his remedy by petitioner to Congress or present it in the Court of Claims. Suffice it to say, without entering much into the argument, that such a theory finds no substantial support in any act of Congress upon the subject or in any decided case. On the contrary, the several acts of Congress for the assessment and collection of internal duties contain many provisions wholly inconsistent with any such theory and which, when considered together, afford an entirely satisfactory basis for the opposite conclusion.
6. None of the internal revenue acts, however, contemplates that collectors shall reimburse themselves for the amount of any judgment recovered against them an account of duties illegally or erroneously assessed and paid under protest. Direction in those acts is without exception that all such judgments shall be paid by the commissioner, including, by the latter acts, costs and expenses of suit.
Clear implication of the several provisions is that a judgment against the collector in such a case is in the nature of a recovery against the United States, and that the amount recovered is regarded as a proper charge against the revenue collected from that source. Evidently, therefore, it is not material in this inquiry whether the collectors of the internal revenue are required to account daily or monthly, or whether they are required to pay into the Treasury the gross or only the net amount of collections, so long as this provision authorizing the commissioner to pay such judgments, costs, and expenses of suit, remains in full force.
Works, and payment therefor is made by the corporation to the trustees of the works, as shown by the only witness examined in the case. Origin of the gas works is shown in the Ordinance of the twenty-first of March, 1835, and it appears that the works were construed and put in operation by means of money subscribed by private individuals, for which they received certificates of stock, signed by the mayor of the city and countersigned by the treasurer, entitling the holder to the proper share of the profits arising from the manufacture and sale of gas. Original subscriptions amounted to one hundred thousand dollars, and the provision was that the works should be under the exclusive control and management of twelve trustees, to be elected by the councils of the city. Purpose was to supply the city and the citizens with gas, but the stipulation was that the public lamps of the city should be supplied at one-half the price paid by private consumers. Five hundred dollars is annually paid by the trustees to the city as rent of the lot for the location and use of the gas works. New subscriptions and loans were subsequently authorized to increase the capital stock for the extension of the works.
the works have been controlled and managed by the trustees, and the interest of the association, which constructed the works and put them in operation, has never been divested or become vested in the corporation.
Plaintiffs authorized the mayor of the city, on the sixteenth day of February, 1856, to contract with the trustees for the lighting, extinguishing, cleansing, and repairs of the public lamps of the city for the term of three years at a stipulated sum for each lamp, and made a sufficient appropriation to carry the contract into effect, and the evidence showed that the works were, throughout the period for which the duties were assessed, in the exclusive possession of the trustees. Testimony also showed that the city paid monthly for the gas consumed in her public lamps throughout that entire period. They sometimes paid a fixed sum for each lamp and sometimes one-half the rate paid by private consumers.
Prayers for instruction were presented by both parties, but the presiding justice rejected them all and instructed the jury that the plaintiffs were not entitled to recover and that their verdict should be for the defendant.
the mere entry by the city for the purpose of laying the foundation to issue the loan certificates, as the possession was only temporary, and the control and management were, by new stipulation, continued in the trustees constituted and appointed in case of any vacancy, as provided in the original ordinance. Rent was paid as before to the city for the lot leased for the location of the works and for the use of the association, and the authorities continued as before to pay monthly or otherwise at stipulated prices for the gas consumed in the public lamps.
city their interests in the gas works. Conclusion is that the duties were properly assessed, and that there is no error in the record.
4 Stat. at Large 632.
Western Saving Fund Society v. City of Philadelphia, 31 Pa.St. 178.
12 Stat. at Large 462-729.
4 Stat. at Large § 32.
14 id. 172, § 67.
14 Stat. at Large 172, § 68.
12 Stat. at Large 434.
12 Stat. at Large 725, 729.
See also 14 id. 111.
Elliott v. Swartwout, 10 Pet. 150.
Bend v. Hoyt, 13 Pet. 267.
13 Stat. at Large 487.
5 Stat. at Large 348; Cary v. Curtis, 3 How. 236; Curtis v. Fiedler, 2 Black 461.
13 Stat. at Large 486, § 16.
Act March 2, 1867, § 10.
Saving Fund Co. v. City of Philadelphia, 7 Casey 187.

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