Source: https://supreme.justia.com/cases/federal/us/319/293/
Timestamp: 2019-04-21 04:10:51+00:00

Document:
1. In the light of its opinion, findings, and conclusions of law, the District Court's dismissal of the suit rests wholly upon its declaration that, as applied to the plaintiffs, the state statute is constitutional, and its judgment is, in effect, a declaratory judgment. P. 319 U. S. 295.
2. Where federal courts, in the exercise of their jurisdiction to render declaratory judgments, are called on to adjudicate what are essentially equitable causes of action, they are free upon equitable grounds to grant or withhold the relief prayed, and considerations which have led federal courts of equity to refuse to enjoin the collection of state taxes, save in exceptional cases, require a like restraint in the use of the declaratory judgment procedure. P. 319 U. S. 300.
when asked to enjoin an unconstitutional state tax, it is their duty to withhold relief when state law with the right of appeal to this Court affords adequate protection. P. 319 U. S. 300.
4. In a suit in the federal district court against a state officer charged with the administration and enforcement of the Louisiana Unemployment Compensation Law, brought by plaintiffs engaged in navigation and operation of vessels used in improving navigable waters of the State, and praying a declaratory judgment that the state law, as applied to them and their employees, is unconstitutional, it was the duty of the court to withhold such relief, it appearing that, under the state law, a taxpayer who pays a challenged tax to the appropriate state officer may maintain a suit for reimbursement. P. 319 U. S. 300.
5. The Acts of August 21, 1937 and August 30, 1935 do not require a result different from that here reached. P. 319 U. S. 301.
Certiorari, 318 U.S. 754, to review the affirmance of a judgment, 43 F.Supp. 981, dismissing a suit for a declaratory judgment.
barges and other vessels, all used in deepening, dredging, extending, and otherwise improving channels underlying the navigable waters of the state, and that the tax or contribution to the state unemployment insurance fund which the state law would exact from each of petitioners exceeded, when the suit was brought, the sum of $3,000. The relief prayed is a declaratory judgment that the state law, as applied to petitioners and their employees, is unconstitutional and void.
After a trial, the district court held the statute applicable to petitioners and their employees and, as applied to them, a valid exercise of state power. 43 F.Supp. 981. The formal judgment ordered dismissal of the suit, but it is to be interpreted in the light of the court's opinion, findings, and conclusions of law. Metropolitan Water Co. v. Kaw Valley Drainage Dist., 223 U. S. 519, 223 U. S. 523; Gulf Refining Co. v. United States, 269 U. S. 125, 269 U. S. 135; Clark v. Williard, 292 U. S. 112, 292 U. S. 118; American Propeller & Mfg. Co. v. United States, 300 U. S. 475, 300 U. S. 479-480. So interpreted, it rests wholly on the court's declaration that the statute applied to petitioners is constitutional; it is thus, in effect, a declaratory judgment.
field" or otherwise precluded the state from applying its law with respect to the employees in question.
"to discuss in their briefs and on oral argument the question whether the declaratory judgment procedure can be appropriately used in this case where the complaint seeks a judgment against a state officer to prevent enforcement of a state statute."
The state act, as the court below held, exacts of employers payments into the state unemployment insurance fund, in the nature of an excise tax upon the exercise of the right or privilege of employing individuals and measured by a percentage of the wages paid. See Carmichael v. Southern Coal & Coke Co., supra. Petitioners have challenged the state's right to collect the tax, and have interposed, as a barrier to the collection, the present suit in the federal court for a declaratory judgment. The district court, as we have indicated, has in substance given a declaratory judgment, which the Circuit Court of Appeals has sustained. Save for that purpose, those courts had no occasion to entertain the suit or pronounce any judgment in it. Neither court nor any of the parties has questioned the sufficiency of the pleadings to present a case for a declaratory judgment. Without raising that issue here, we pass at once to the question, submitted to counsel, whether the declaratory judgment procedure may be appropriately resorted to in the circumstances of this case.
the collection of any tax and for a complete and adequate remedy for the prompt recovery by every taxpayer of any illegal tax paid by him."
And Act 330 of 1938 sets up a complete statutory scheme to carry into effect the constitutional provision. By it, the courts of the state are forbidden to restrain the collection of any state tax, and any person aggrieved and "resisting the payment of any amount found due, or the enforcement of any provision of such laws in relation thereto" shall pay the tax to the appropriate state officer and file suit for its recovery in either the state or federal courts. Pending the suit, the amount collected is required to be segregated and held subject to any judgment rendered in the suit. If the taxpayer prevails in the suit, interest at two percent per annum is added to the amount of taxes refunded.
Ry. v. System Federation, 300 U. S. 515, 300 U. S. 549-553), should stay its hand in the public interest when it reasonably appears that private interests will not suffer. See Pennsylvania v. Williams, 294 U. S. 176, 294 U. S. 185, 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. Whenever the question has been presented, this Court has uniformly held that the mere illegality or unconstitutionality of a state or municipal tax is not, in itself, a ground for equitable relief in the courts of the United States. If the remedy at law is plain, adequate, and complete, the aggrieved party is left to that remedy in the state courts, from which the cause may be brought to this Court for review if any federal question be involved."
Matthews v. Rodgers, supra, 284 U. S. 525-526.
Interference with state internal economy and administration is inseparable from assaults in the federal courts on the validity of state taxation, and necessarily attends injunctions, interlocutory or final, restraining collection of state taxes. These are the considerations of moment which have persuaded federal courts of equity to deny relief to the taxpayer -- especially where the state, acting within its constitutional authority, has set up its own adequate procedure for securing to the taxpayer the recovery of an illegally exacted tax.
The earlier refusal of federal courts of equity to interfere with the collection of state taxes unless the threatened injury to the taxpayer is one for which the state courts afford no adequate remedy, and the confirmation of that practice by Congress, have an important bearing upon the appropriate use of the declaratory judgment procedure by the federal courts as a means of adjudicating the validity of state taxes.
It is true that the Act of Congress speaks only of suits "to enjoin, suspend, or restrain the assessment, levy, or collection of any tax" imposed by state law, and that the declaratory judgment procedure may be, and in this case was, used only to procure a determination of the rights of the parties, without an injunction or other coercive relief. It is also true that that procedure may, in every practical sense, operate to suspend collection of the state taxes until the litigation is ended. But we find it unnecessary to inquire whether the words of the statute may be so construed as to prohibit a declaration by federal courts concerning the invalidity of a state tax. For we are of the opinion that those considerations which have led federal courts of equity to refuse to enjoin the collection of state taxes, save in exceptional cases, require a like restraint in the use of the declaratory judgment procedure.
U.S. 227. Thus, the Federal Declaratory Judgments Act (Act of June 14, 1934, 48 Stat. 955, as amended, 28 U.S.C. § 400) provides in subdivision 1 that a declaration of rights may be awarded although no further relief be asked, and in subdivision 2 that "further relief based on a declaratory judgment or decree may be granted whenever necessary or proper."
The jurisdiction of the district court in the present suit, praying an adjudication of rights in anticipation of their threatened infringement, is analogous to the equity jurisdiction in suits quia timet or for a decree quieting title. See Nashville, C. & St.L. Ry. v. Wallace, 288 U. S. 249, 288 U. S. 263. Called upon to adjudicate what is essentially an equitable cause of action, the district court was as free as in any other suit in equity to grant or withhold the relief prayed, upon equitable grounds. The Declaratory Judgments Act was not devised to deprive courts of their equity powers or of their freedom to withhold relief upon established equitable principles. It only provided a new form of procedure for the adjudication of rights in conformity to those principles. The Senate committee report on the bill pointed out that this Court could, in the exercise of its equity power, make rules governing the declaratory judgment procedure. S.Rep. No. 1005, 73d Cong., 2d Sess., p. 6. And the House report declared that "large discretion is conferred upon the courts as to whether or not they will administer justice by this procedure." H.R.Rep. No. 1264, 73d Cong., 2d Sess., p. 2, and see Brillhart v. Excess Ins. Co., 316 U. S. 491, 316 U. S. 494; Borchard, Declaratory Judgments (2d ed.) p. 312.
when, as in the present case, it appears that the state legislature has provided that, on payment of any challenged tax to the appropriate state officer, the taxpayer may maintain a suit to recover it back. In such a suit, he may assert his federal rights and secure a review of them by this Court. This affords an adequate remedy to the taxpayer and, at the same time, leaves undisturbed the state's administration of its taxes.
The Act of August 21, 1937, was predicated upon the desirability of freeing from interference by the federal courts state procedures which authorize litigation challenging a tax only after the tax has been paid. See S.Rep. No. 1035, 75th Cong., 1st Sess.; H.R.Rep. No. 1503, 75th Cong., 1st Sess. Even though the statutory command be deemed restricted to prohibition of injunctions restraining collection of state taxes, its enactment is hardly an indication of disapproval of the policy of federal equity courts, or a mandatory withdrawal from them of their traditional power to decline jurisdiction in the exercise of their discretion.
For like reasons, we think it plain also that the enactment of the Act of August 30, 1935, 49 Stat. 1027, 28 U.S.C. § 400(1), which excluded from the operation of the Declaratory Judgments Act all cases involving federal taxes, cannot be taken to deprive the courts of their discretionary authority to withhold declaratory relief in other appropriate cases. This amendment was passed merely for the purpose of "making it clear" that the Declaratory Judgments Act would not permit "a radical departure from the long continued policy of Congress" to require prompt payment of federal taxes. See S.Rep. No. 1240, 74th Cong., 1st Sess., p. 11; H.R.Rep. No. 1885, 74th Cong., 1st Sess., p. 13.
judgment should have been denied without consideration of the merits.

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