Source: https://supreme.justia.com/cases/federal/us/291/24/
Timestamp: 2019-04-24 12:43:50+00:00

Document:
1. Where the state law permits an action at law for recovery of a tax paid under protest, the taxpayer may pursue the same remedy in the federal court if the requisite diversity of citizenship and amount in controversy are present. P. 291 U. S. 28.
2. Existence of a statutory remedy to test the validity of a tax appraisal by appeal to a particular state court, in which the party opposed to the taxpayer will be the state itself, will not affect the equity jurisdiction of the federal court to enjoin, since such a proceeding, even if regarded as an action at law, would be confined to the state court and would not be cognizable by the federal court, either originally or by removal. P. 291 U. S. 29.
3. A proceeding in a state court, on appeal from a tax appraisal, wherein the court has jurisdiction to determine not only the valuation, but also the validity of the tax, and which is tried as a case between the taxpayer and the state as adversary parties, and results in a final judgment appealable to a higher court, is to be classified as a judicial, rather than an administrative, proceeding. P. 291 U. S. 29.
4. To such a proceeding the principle that administrative remedies under state laws must be exhausted before an injunction against state officers is sought in the federal courts on constitutional grounds does not apply. P. 291 U. S. 34.
5. A bill to enjoin the imposition and collection of a state inheritance tax as beyond the constitutional power of the state held not premature, although the assessment had not yet been completed, it appearing clearly by the allegations of the bill that the defendant state taxing officials believed the tax valid and would proceed to impose it if not restrained. P. 291 U. S. 34.
Pennsylvania from imposing and collecting an inheritance tax on personal property left by a New York decedent, which, as the plaintiff executor averred, had no taxable situs in the Commonwealth.
requests for an immediate determination of tax liability in response to which the appellee Schnader orally advised the appellant its claim of nontaxability in Pennsylvania would be denied. The bill charges that, if the statute be construed to impose an inheritance tax upon the paintings merely because they were temporarily within the Commonwealth at the time of the decedent's death, it is unconstitutional as depriving the appellant of property without due process and denying equal protection of the laws, in contravention of the Fourteenth Amendment, and, if the statute be construed as not applying to the property, the threatened appraisal, assessment, and collection by the defendants will unconstitutionally deprive the appellant of property without due process and deny it equal protection. It further charges that the threat of appraisement, assessment, and collection, and the unlawful failure and refusal of the appellee Metzger to issue a waiver of taxes on behalf of the Commonwealth have caused and are causing irreparable injury by interfering with the administration of the estate in the Surrogate's Court of New York, preventing distribution, compelling the executor to maintain large cash reserves at a low rate of interest to cover a possible Pennsylvania tax and costs of litigation, and also that the threatened tax constitutes a possible lien and a cloud upon the title of the plaintiff, interfering with the sale of the paintings as directed by the will. The bill avers the absence of any adequate remedy at law.
County Court, which has jurisdiction to pass on both the amount of the tax and the legality of its imposition. The bill was therefore dismissed for want of equity.
"Any person not satisfied with the appraisement . . . may appeal within thirty days to the Court of Common Pleas of Dauphin County, on paying or giving security to pay all costs together with whatever tax shall be fixed by the court. Upon such appeal, the court may determine all questions of valuation and the liability of the appraised estate for such tax, subject to the right of appeal to the Supreme or Superior Court. "
The appeal must be entered in a state court specifically designated by the statute, and is thus not an ordinary action at law, but a statutory proceeding. The Commonwealth has conditioned the right to implead it, upon resort to a forum of its choice. The taxpayer cannot, therefore, though a nonresident, appeal from the appraisement to a federal court. Moreover, in such cases, upon the perfecting of an appeal, the Commonwealth becomes the adverse party to the litigation in the Common Pleas Court (Commonwealth v. Taylor, 29A Dauph.Co.Rep'r 102; Commonwealth v. Taylor, 32 Dauph.Co.Rep'r 207), and this fact would prevent removal of the case from the Dauphin County Court to a federal court; Judicial Code, § 24, as amended; 28 U.S.C. § 41(1); Judicial Code, § 28, as amended; 28 U.S.C. § 71, for the state is not a citizen within the purview of these statutes which define the jurisdiction of the federal courts and permit a removal to them (Stone v. South Carolina, 117 U. S. 430; Postal Telegraph Cable Co. v. Alabama, 155 U. S. 482; Arkansas v. Kansas & Texas Coal Co., 183 U. S. 185), nor is the controversy one arising under the laws of the United States. Tennessee v. Union & Planters' Bank, 152 U. S. 454; Chicago, R.I. & P. Ry. Co. v. Nebraska, 251 F. 279. As the statutory remedy, if it be treated as an action at law, would lie only in the state court and is not cognizable by the federal courts either as an original action or by removal, its existence cannot oust federal equity jurisdiction. Smyth v. Ames, 169 U. S. 466, 169 U. S. 516; Chicago, B. & Q. R. Co. v. Osborne, 265 U. S. 14, 265 U. S. 16; Risty v. Chicago, R.I. & P. Ry. Co., 270 U. S. 378, 270 U. S. 388; Matthews v. Rodgers, supra, p. 284 U. S. 526.
least in part administrative, and a suit for injunction may not be entertained by a federal court prior to the decision of the state court. Prentis v. Atlantic Coast Line, 211 U. S. 210; Porter v. Investors Syndicate, 286 U. S. 461. The statutes under consideration in those cases delegated legislative power of regulation to an administrative body and vested a revisory power in a court. As has repeatedly been held, the action of the court in such a matter is legislative, rather than judicial, so that one who has not pursued the legislative process to a conclusion cannot turn to a court of equity for relief from a regulatory order which is not the final word of the constituted state authority. But other decisions make it clear that, while the action of the appraiser in a case like the present is purely administrative, the function of the court upon appeal is judicial in character if, when the case is brought into the court, the Commonwealth becomes plaintiff and the taxpayer defendant, and the action is tried as an ordinary action, resulting in a judgment which is final and binding on the parties, subject only to appeal to a higher state court, as permitted by the act. This renders the proceeding judicial, and gives it the character of a suit or action at law.
"The proceeding in the present case before the commissioners appointed to appraise the land was in the nature of an inquest to ascertain its value, and not a suit at law in the ordinary sense of those terms. But when it was transferred to the District Court by appeal from the award of the commissioners, it took, under the statute of the state, the form of a suit at law, and was thenceforth subject to its ordinary rules and incidents. The point in issue was the compensation to be made to the owner of the land -- in other words, the value of the property taken. No other question was open to contestation in the District Court."
To the same effect, see Searl v. School District No. 2, 124 U. S. 197; Mason City & Ft. Dodge R. Co. v. Boynton, 204 U. S. 570.
"the trial in the circuit court of the county was 'the trial' of the case at any time before which it might be removed into the circuit court of the United States. . . ."
"If, however, the presentation of a demand against the county, duly verified according to law, to the county court thereof, 'for allowance or rejection,' is not the beginning of a suit, or does not involve a trial inter partes, it is then only a preliminary proceeding to a suit or controversy which, by the appeal of either side, is or may be carried to an appellate court, before which there is an actual trial between the parties interested. The right to maintain this revisory trial in the state court . . . will be sufficient to maintain a like suit by original process in a federal court where the requisite diverse citizenship exists."
judge, who then fixed the value and the amount of tax and gave notice to all interested parties. Anyone dissatisfied with the judge's finding might appeal within sixty days to the County Court upon filing bond to cover costs and the tax which might be fixed by the court. The statute provided that county courts should have jurisdiction "to hear and determine all questions in relation to all taxes arising under this article." It will be noted how closely the procedure resembles that prescribed with respect to the tax in controversy. It was held that the proceeding was ex parte until it reached the county court; but thereafter became a controversy inter partes, and the court's action in determining all questions in relation to the tax was not merely administrative, but judicial.
If the Dauphin County Court were by the Act of Assembly granted only the right to revise the valuation of the appraiser and precluded from considering any other question, its proceedings would be purely administrative, and the contention that the appellant had failed to pursue to the end its administrative remedy would be sound (Upshur County v. Rich, 135 U. S. 467) at all events where the valuation is a subject of controversy.
The court below relied upon Keokuk & Hamilton Bridge Co. v. Salm, 258 U. S. 122, where a bill to enjoin collection of a state tax was held to lack equity. That case is, however, distinguished by the fact that, before resorting to any court. the taxpayer could have appealed to the board of review to correct the assessment of which he complained, and the record failed to show that he had pursued the administrative remedy so afforded him (p. 258 U. S. 125).
should omit to take an appeal to the Dauphin County Common Pleas Court, the assessment would become final and the appellant liable to suit for the amount of the tax. [Footnote 4] As the Commonwealth is the plaintiff in the action, the cause could not be removed for reasons already stated.
We are of opinion that, upon the making of the appraisement, the administrative procedure is at an end, and the appellant can thereafter resort to a federal court of equity to restrain further action by the state officers if in violation of constitutional rights.
3. The question, then, is whether the bill was prematurely filed. In view of what has been said, the appellant's cause of action in equity will not, strictly speaking, arise until an appraisement is made and certified to the Department of Revenue and notice of the fact is given appellant. However, in view of the allegations of the bill, we are not inclined to hold the suit premature. The bill charges that the Secretary of Revenue has refused to issue a waiver of tax, and that the Attorney General has notified the appellant and the state's appraiser the property is subject to the tax, and the appellant's claim for exemption will be denied. The Commonwealth's law officers plainly intend to perform what they consider their duty, and will, unless restrained, cause the assessment and imposition of the tax. The action, the legality of which is challenged, thus appears sufficiently imminent and certain to justify the intervention of a court of equity. Compare Pennsylvania v. West Virginia, 262 U. S. 553, 262 U. S. 592. Moreover, no purpose would be served by dismissing the bill if, as we hold, the moment the proposed assessment is made, another suit may be instituted in the federal court.
Act of June 20, 1919, P.L. 521; 72 Purdon's Penna.Stats. § 2301, as amended by Act of June 22, 1931, P.L. 690.
Act of April 9, 1929, P.L. 343, Art. V, § 503; 72 Purdon's Penna.Stats. § 503.
Act of April 9, 1929, P.L. 343, § 1202; 72 Purdon's Penna.Stats. § 1202.
Act of April 9, 1929, P.L. 343, §§ 203(h), 1406; 72 Purdon's Pa.Stats. §§ 203(h), 1406.

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