Court Opinion

ID: 9643970
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:45:13.376253+00
Date Added: 2024-06-11T18:11:06.546165
License: Public Domain

On Rehearing.
ERNEST F. COCHRAN, District Judge.
In the former opinion this court held that section 32 of the South Carolina Tax Act of 1926 provided an adequate remedy at law by payment under -protest and recovery of the alleged illegal taxes by an action which was available in the federal courts, and therefore denied the interlocutory injunction. The plaintiff presented a petition for a rehearing upon a ground which was not considered by the court nor indeed presented at the first hearing, and a rehearing was ordered, and the court has heard the arguments of the parties thereon.
The new point presented is that the remedy provided by section 32 of the South Carolina Tax Act of 1926 is a suit against the state, and such suit is confined to the court of common pleas, and is therefore not- available in the federal courts. The plaintiff concedes, as was decided in the former opinion, that, if a state provides a remedy by ordinary action against individuals, and the proper requisites of federal jurisdiction exist, such action is available in the federal courts and would therefore be an adequate remedy, under the decisions of the Supreme Court in Singer Sewing Machine v. Benedict, 229 U. S. 481, 486, 33 S. Ct. 942, 57 L. Ed. 1288, and Chicago, B. & Q. R. Co. v. Osborne, 265 U. S. 14, 16, 44 S. Ct. 431, 68 L. Ed. 878.
The precise question therefore presented upon the rehearing is whether the remedy provided by section 32 of the Tax Act of 1928 is a suit against the state, restricted to the state courts, and therefore not available in the federal courts.
There can be no doubt but that the remedy provided by section 32 is a suit against the state. The object of the suit is to compel the state to perform its obligation to repay from the state treasury taxes illegally collected, and under the. decisions of the Supreme Court of the United States, such a suit is a suit against the state. Smith v. Reeves, 178 U. S. 436, 20 S. Ct. 919, 44 L. Ed. 1140; Ex parte New York, 256 U. S. 490, 500, 501, 41 S. Ct. 588, 65 L. Ed. 1057; Murray v. Wilson Distilling Co., 213 U. S. 151, 168, 169, 29 S. Ct. 458, 53 L. Ed. 742.
The Eleventh Amendment to the Constitution of the United States forbids a suit against a state, but the state may waive its immunity from suit, and, when it does waive its immunity and consents to be sued in its own courts, this does not constitute a consent to be sued in a federal court. Smith v. Reeves, 178 U. S. 436, 20 S. Ct. 919, 44 L. Ed. 1140; Chandler v. Dix, 194 U. S. 590, 24 S. Ct. 766, 48 L. Ed. 1129; Murray v. Wilson Distilling Co., 213 U. S. 151, 168, 172, 29 S. Ct. 458, 53 L. Ed. 742.
In Murray v. Wilson Distilling Co., supra, the Supreme Court used the following language : “And it is elementary that, even if a state has consented’ to be sued in its own courts by one of its creditors, a right would not exist in such creditor to sue the state in a court of the United States,” citing Smith v. Reeves, supra, Chandler v. Dix, supra.
Section 32 of the Tax Act of 1926 provides for payment under protest, and that the ággrieved taxpayer may “bring an action against the South Carolina tax commission for the recovery thereof in the court of common pleas for any eounty having jurisdiction.” The court of common pleas is a court of the state of South Carolina, provided for in its Constitution and laws, and by this provision in section 32 .the state consented to be sued in that court, and that consent cannot be extended by implication into a consent to be sued in any other court. From the principles hereinbefore stated, it is clear that, if the plaintiff in this case should pay this tax under protest and bring an action at law in a federal court, such action would *345be defeated by a plea to the jurisdiction on the ground that the state had never consented to a suit in that court.
While these principles are firmly established, it is, however, equally well-settled that the test of equity jurisdiction in a federal court is the inadequacy of the remedy on the law side of that court and not the inadequacy of the remedies afforded by the state courts. In other words, if a suitor has sufficient ground to invoke the jurisdiction of a federal court of equity, a remedy at law in the state court which is not available in a federal court is not sufficient to deprive a federal equity court of jurisdiction. Smythe v. Ames, 169 U. S. 466, 516, 18 S. Ct. 418, 42 L. Ed. 819; Chicago, B. & Q. R. Co. v. Osborne, 265 U. S. 14, 16, 44 S. Ct. 431, 68 L. Ed. 878; Risty v. C., R. I. & P. R. Co., 270 U. S. 378, 388, 46 S. Ct. 236, 70 L. Ed. 641.
Erom the principles announced in these cases, we think it logically and inescapably follows that in the ease at bar the suit authorized by section 32, being against the state and restricted to the state court, is not available in the federal courts, and therefore the plaintiff has no adequate remedy at law in the federal court, and equity should assume jurisdiction. Numerous cases have been cited which, it is asserted, are inconsistent with the decisions cited above. It is unnecessary to enter into any extended discussion of those cases.' It is sufficient to say that we have examined them all very carefully, and in our opinion they are distinguishable, and are not inconsistent with,the principles set forth in the eases cited above.
It is true, as stated in our former opinion, that a state cannot directly confer jurisdiction upon a federal court, but the question now presented is not a question of conferring jurisdiction, but of consenting to a suit against the state, and we perceive no reason why a state cannot waive its immunity and consent to be sued in a federal court as well as in its own courts. While we think that it, is plain that the remedy provided by section 32 is a suit against the state and not available in the federal courts, nevertheless, even if we assume that it is not plain, it must be conceded that it is at least doubtful whether the remedy afforded by that section is available in a federal court at law, and, wherever the remedy is doubtful at law, equity will assume jurisdiction. Davis v. Wakelee, 156 U. S. 680, 15 S. Ct. 555, 39 L. Ed. 578; Union Pac. R. Co. v. Weld County, 247 U. S. 282, 38 S. Ct. 510, 62 L. Ed. 1110; Atlantic Coast Line R. Co. v. Daughton, 262 U. S. 413, 426, 43 S. Ct. 620, 67 L. Ed. 1051, and cases cited therein.
At the rehearing, the defendants’ counsel made the point that, aside from the remedy afforded by section 32, the plaintiff would have the right under the common law to pay the taxes under protest and sue the members of the tax commission individually and obtain personal judgment against them, and that this would constitute an adequate remedy at law. The defendants’ theory is that, even in the absence of a statute authorizing payment under protest and recovery by suit against the officer making the collection, if the tax is paid under protest, the collecting officer would thereby be put on notice, and, if the tax is illegal, then his act of retaining it would be tortious, and he would be liable personally at the common law, even though he had paid it into the state treasury. We are not prepared to hold that, even if under the South Carolina law such a remedy against the commission personally existed, it would prevent equity interfering by injunction to prevent the tortious act in the first instance. If the defendants’ contention is correct, then all of those cases, federal and state (including South Carolina), where officers have been enjoined from collecting illegal taxes, were incorrectly decided; for under the defendants’ theory in all eases, by the principles of the common law, a payment under protest would not be voluntary and would give a right of action against the officer and thereby provide an adequate remedy at law. But in none of those cases (and their name is legion) is there any hint or suggestion that a mere payment under protest in the absence of statutory authority, would give such a right of action against the collecting officer as would oust the equitable jurisdiction. The defendants have cited a number of decisions in support of their proposition that by payment under protest the aggrieved taxpayer might sue the collecting officer personally; but they have not cited any South Carolina decision which holds such to be the law in South Carolina, nor have they cited any decision anywhere that, in the absence of statute, a payment under protest would give the taxpayer a right to sue the collecting officer personally and thereby prevent equity from interfering by way of injunction to prevent the illegal act. The South Carolina decisions certainly give no hint or indication that such a remedy exists, or, even if it did, that it would prevent the equity jurisdiction. See Ware Shoals Mfg. Co. v. Jones, 78 S. C. *346211, 58 S. E. 811; Santee Mills v. Query, 122 S. C. 158, 115 S. E. 202; Crescent Mfg. Co. v. South Carolina Tax Commission, 129 S. C. 480, 124 S. E. 761; Lancaster Cotton Mills v. South Carolina Tax Commission, 132 S. C. 466, 129 S. E. 429.
But, even if it be assumed that prior to the enactment of section 32 of the Tax Act of 1926 the aggrieved taxpayer would have a right of action after payment under protest against the members of the tax commission individually and personally, although there is no South Carolina decision to that effect, it is clear that since the enactment of section 32 of that act there no longer exists any remedy against the tax commission personally; for that section expressly provides a remedy by the payment of illegal taxes under protest and a suit against the tax commission (not personally or as individuals) and a repayment from the state treasury if such suit be successful; and, furthermore, that-section expressly says that there shall be no other remedy. It is clear that section 32 does not intend to create a personal remedy against the tax commission, and, if any such remedy existed before that section was enacted, it has been abolished by the express words of that section. The state certainly has a right to relieve the tax commission from personal responsibility by providing a remedy against the state, backed by the responsibility of the state. Burrill, Treas., v. Locomobile Co., 258 U. S. 34, 38, 42 S. Ct. 256, 66 L. Ed. 450. When the act says in express terms that there shall be no other remedy, it is difficult to see how the defendants can claim that there is another remedy. There is no decision of the Supreme Court of South Carolina which holds that under this statute the plaintiff can still maintain an action individually against the members of the tax commission and recover a personal judgment against them for money that has been paid into the state treasury. In the ab-sense of such decision, there is, to say the least, a substantial doubt or plausible ground for controversy respecting the interpretation or meaning of this statute, and in such case, under the decisions of the Supreme Court of the United States, that we have cited above, the plaintiff is not bound to speculate and take his chances at law, but may invoke the jurisdiction of a federal court of equity.
The interlocutory injunction must therefore be granted.
PARKER, Circuit Judge, and WATKINS, District Judge, concur.