Court Opinion

ID: 9450824
Source: CourtListenerOpinion
Date Created: 2023-08-04 16:58:42.850833+00
Date Added: 2024-06-11T17:32:28.116379
License: Public Domain

RIVES, Circuit Judge
(dissenting):
With deference, I respectfully dissent.
The majority holds, in effect, that the Great Lakes case (319 U.S. 293, 63 S.Ct. 1070) teaches that the Johnson Act, 28 U.S.C. § 1341, establishes a jurisdictional rule preventing a federal court from entertaining a declaratory judgment action with respect to the assessment, levy or collection of any tax under state law where a plain, speedy and efficient remedy may be had in courts of such state.1
*202I do not agree. The Great Lakes decision itself bases the affirmance “solely on the ground that, in the appropriate exercise of the court’s discretion, relief by way of a declaratory judgment should have been denied without consideration of the merits.” (319 U.S. at 301, 302, 63 S.Ct. at 1074.) (Emphasis supplied.) True, as the majority notes, the Court also said: “ * * * it is the court’s duty to withhold such relief 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.” (319 U.S. at 300, 301, 63 S.Ct. at 1074.) That statement, like all others, must be considered against the background of facts and circumstances surrounding the case then being decided by the court. It was not meant to indicate that in any and all cases the existence of a plain, speedy and efficient state remedy is the only matter to be considered in the appropriate exercise of the court’s discretion. In the Great Lakes case, the defendant made a motion to dismiss the action for the alleged reason that the complaint fails to state a claim upon which relief can be granted. That motion was followed by the defendants’ answer, with full reservation of all rights under its motion to dismiss. See the opinion of the district court in Great Lakes Dredge and Dock Co. v. Charlet, E.D.La.1942, 43 F.Supp. 981, 983. In the present case there was no motion to dismiss. The defendants not only formally admitted that the court had jurisdiction, but they demanded that the court exercise that jurisdiction, and stipulated in writing that the sole issue for determination was a ruling on the merits. They went even further and stipulated that the decision should apply not only to the tax year 1961 on which the complaint was based but to subsequent tax years. To that end the defendants stipulated the value of the claimed imports sought to be taxed for the years 1962 and 1963.
The complaint in the present case based jurisdiction both on the existence of a federal question, 28 U.S.C. § 1331, and on diversity of citizenship, 28 U.S.C. § 1332. It alleged that “this action presents for determination a case of actual controversy within the jurisdiction of this court under 28 U.S.C.A. Section 2201.” It alleged that the plaintiff was a citizen of New York and the defendants were citizens of the State of Texas. All of these allegations were expressly and formally admitted in the defendants’ answer, which concluded as follows: “Wherefore, Defendants demand that the Court adjudicate the automobiles of Plaintiff to be taxable property within the State of Texas and within the jurisdiction of Defendants.”
Thus, while in the Great Lakes case, supra, the adequacy of the state remedy was the only circumstance to be considered in the appropriate exercise of the court’s discretion, there are in the present case other controlling circumstances to which I will revert. Before doing so, however, let me discuss further whether the Johnson Act does establish a jurisdictional bar to the entertainment of a declaratory judgment action with respect to the assessment, levy or collection of any tax under state law. That it does not is, I submit, manifest from the plain language of the one-sentence statute. “The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.” 28 U.S.C. § 1341. No amount of legalistic language can convert that plain statute into a denial of federal jurisdiction to entertain a declaratory judgment action with respect to a tax under state law. The Supreme Court itself has repeatedly recognized that the Great Lakes case went no further than to establish a rule of discretion.2 3
*203•Professor Moore, after quoting at length from the Great Lakes case, stated with his usual clarity the effect of that decision:
“Thus the Court did not give a definitive answer as to whether or not the 1937 [Johnson] Act includes declaratory judgments. In view of the fact that the Declaratory Judgment Act had been on the books for three years prior to the 1937 Act, Congress was undoubtedly aware of the remedies afforded by that procedure. That the 1937 Act made no mention of declaratory judgments is evidence that the declaratory remedy was not included within the Act’s prohibition. Thus federal courts still have technical jurisdiction to render declaratory judgments as to the invalidity of state taxes. But it is well settled that courts, pursuant to judicial discretion, may refuse to exercise jurisdiction in declaratory actions.9 The considerations which prompted courts of equity to refuse to enjoin the collection of state taxes are equally applicable to actions for declaration of invalidity of such taxes.10 The exercise of discretion, rather than lack of jurisdiction over the subject matter, is here at issue.
6 Moore, Federal Practice [[57.18 (2d ed. 1952), pp. 3096-97.
The question involved in the present case is not one of jurisdiction but one of the appropriate exercise of the court’s discretion. Clearly and admittedly the court had jurisdiction both under the federal question statute, 28 U.S.C. § 1331, and under the diversity of citizenship statute, 28 U.S.C. § 1332. The declaratory judgment statute itself makes clear that the court has jurisdiction with respect to state taxes. That statute begins: “In a case of actual controversy within its jurisdiction, except with respect to federal taxes, any court of the United States” etc. (Emphasis supplied.) There could hardly be a plainer case calling for the application of the rule ex pressio unius est exclusio alterius. While the statute expressly excludes controversies over federal taxes, controversies over state taxes are not similarly excluded. See 3 Barron & Holtzoff, Federal Practice & Procedure, Rules ed. (Wright) § 1264, p. 290, with the pertinent authorities collected in footnote 45. That the Johnson Act does not establish a judicial bar to a district court’s entertainment of a declaratory judgment action with respect to a tax under state law is made clear by simply reversing the positions of the parties. If the present defendants, the City of Houston and the Houston Independent School District, had as plaintiffs filed this complaint naming the present plaintiff as defendant, there could be no argument but that the court had jurisdiction under sections 1331, 1332 and 2201 of Title 28, United States Code. In substance and effect, that is what the defendants did do when they stipulated on pretrial “that the sole issue for determination” is a decision on the merits, that that decision should extend beyond the tax year 1961 involved in the complaint, and should be binding for subsequent tax years; and when in their answer they made formal demand that the court adjudicate the merits. Clearly, I submit, the district court had jurisdiction and the only question is whether in the appropriate exercise of its discretion, the court should have declined to consider the merits.
As has been stated, there was no motion to dismiss in this case. Admittedly there are cases in which the district court should refuse sua sponte to exercise its jurisdiction. Matthews v. Rodgers, 1932, 284 U.S. 521, 52 S.Ct. 217, 76 L.Ed. 447, arose before the original Johnson Act was passed in 1934 (48 Stat. 775). In *204that case the plaintiff sought to enjoin the collection of a state tax as an unconstitutional burden on interstate commerce. The Supreme Court noted that the objection to the equity jurisdiction of the district court had been properly raised by motion to dismiss, but also stated:
“The want of equity jurisdiction, if obvious, may and should be objected to by the court of its own motion. Twist v. Prairie Oil Co., 274 U.S. 684, 690 [47 S.Ct. 755, 71 L.Ed. 1297]. In other cases, this jurisdictional requirement, unlike the others mentioned, may be treated as waived if the objection is not presented by the defendant in limine. Duignan v. United States, 274 U.S. 195, 199 [47 S.Ct. 566, 71 L.Ed. 996]; Singer Sewing Machine Co. v. Benedict, 229 U.S. 481, 484 [33 S.Ct. 942, 57 L.Ed. 1288] ; Thompson v. Central Ohio R. Co., 6 Wall. 134 [18 L.Ed. 765]; compare Matson Navigation Co. v. United States, ante [284 U.S.] p. 352 [52 S.Ct. 162, 76 L.Ed. 336]; Hilton v. Dickinson, 108 U.S. 165, 168 [2 S. Ct. 424, 27 L.Ed. 688]; Grace v. American Central Insurance Co., 109 U.S. 278, 283-284 [3 S.Ct. 207, 27 L. Ed. 932]; Bors v. Preston, 111 U.S. 252,255 [4 S.Ct. 407,28 L.Ed. 419].” (284 U.S. 524-25, 52 S.Ct. 219)
The two Sixth Circuit cases relied on in the majority opinion do not support a holding that under the circumstances of the present case the district judge should have sua sponte dismissed the complaint. In Wyandotte Chemicals Corp. v. City of Wyandotte, 6 Cir. 1963, 321 F.2d 927, 929, the defendants moved to dismiss the complaint and the district judge denied the motion on the ground that the state remedies were not adequate. The question presented was the adequacy of the state remedies. In Helmsley v. City of Detroit, Michigan, 6 Cir. 1963, 320 F.2d 476, the district judge was not misled into exercising jurisdiction but acted sua sponte and dismissed the complaint and his judgment was affirmed. That is different from the present case where not only was the discretion of the district court not invoked but the defendants actively invited and even demanded that the district court decide the merits.
If, however, there should be any doubt as to the jurisdiction of the district court to entertain the declaratory judgment action, I submit that there can be no doubt whatsoever as to its jurisdiction to entertain the defendants’ counterclaim seeking to recover the taxes for the year 1961. The majority disposes of that question in the last footnote of the opinion, stating: “Once the District Court entertained the suit, as it did, the taxing authorities were, or at least reasonably felt themselves, obliged to file a compulsory counterclaim for the taxes as assessed. F.R.Civ.P. 13.” What the majority overlooks is that at the time the counterclaim was filed the district court had not decided to entertain the suit. The counterclaim was filed along with the answer as the defendants’ only pleading in the case. Certainly the defendants could reasonably have felt themselves under no compulsion to file that counterclaim. Not only could they have had no doubt but that the district court would have allowed the counterclaim to be filed by way of amendment under Rule 15, Fed.R.Civ.P., but they had an actual right under Rule 12 to withhold the filing of the counterclaim until the district court had ruled on the appropriate motion to dismiss. See Lawhorn v. Atlantic Refining Co., 5 Cir. 1962, 299 F.2d 353, 356-57; 2 Moore, Federal Practice ¶[12.07, p. 2244.
At a time when they were under no compulsion to do so, the defendants counterclaimed seeking to recover the taxes for the year 1961. The district court had jurisdiction of that counterclaim just as it would have had jurisdiction over an original action filed by the defendants, the City and the School District, both under the grant of jurisdiction of federal questions, 28 U.S.C. § 1331, and under the diversity statute, 28 U.S.C. § 1332. In a suit by the State Tax Collector of Mississippi for the collection of past due taxes invoking diversity jurisdiction, this Court held that the State of *205Mississippi was the real party-plaintiff and that, a sta|;e not being a citizen, there was no jurisdiction under the diversity statute. Craig v. Southern Natural Gas Co., 5 Cir. 1942, 125 F.2d 66. There is, of course, no dispute in this case and it is formally admitted that the defendants, the City and the School District, are in the position of citizens within the diversity statute. Ordinarily, actions brought by or against a political subdivision of a state are maintainable in a federal court on the ground of diversity of citizenship. See cases collected in Annotation 147 ALR, p. 790, et seq. In addition, this case arises under the Constitution of the United States within section 1331 of Title 28, United States Code. Under that statute there would be jurisdiction of a case filed by the state itself, and there can be no possible doubt that the City and School District could validly invoke federal jurisdiction for the collection of the taxes.
The situation faced by the court in this case is almost analogous to that with which we were confronted in City of Orange, Texas v. Levingston Shipbuilding Co., 5 Cir. 1958, 258 F.2d 240. There we held that the Court was without jurisdiction of a complaint which prayed for an injunction prohibiting the City from enforcing its tax assessment; that that was in the very teeth of the plain command of the statute, 28 U.S.C. § 1341. However, the City had filed an original suit for the recovery of its taxes which had been removed to the federal court, and this Court held that, “with the injunction out of the way, the suit was simply one for delinquent taxes for 1954 and 1955,” 258 F.2d at 241, and proceeded to decide the merits.
In summary, I would hold that the Great Lakes case does not teach that the Johnson Act establishes a jurisdictional rule against a federal court entertaining a declaratory judgment action with respect to taxes under state law; that the question to be decided is whether the district court committed an error of discretion in entertaining the declaratory judgment action; that no such error was committed; that the district court had no discretion but was under a duty to entertain the defendants’ counterclaim and to decide the merits under that counterclaim.
The majority does not reach a decision of the merits, and I will therefore forego any discussion other than to say that I agree with the opinion and decision of the district court. Standard-Triumph Motor Co. v. City of Houston, S.D.Tex. 1963, 220 F.Supp. 732. I think that the judgment should be affirmed and, therefore, respectfully dissent.

. Thus, in various parts of its opinion the majority states:
“ * * * were the Johnson Act not a restraint upon the Court itself but a mere matter left to the parties, we would readily conclude that there had been a waiver.” (page 197). “ * * * it is inconceivable that the Supreme Court intended to allow any discretion to grant declaratory relief where adequate state remedies were available.” (page 199). “The congressional policy is a restraint, not upon the parties, but upon the Court.” (page 201).

. Spector Motor Co. v. McLaughlin, 1944, 323 U.S. 101, 105-106, 65 S.Ct. 152, 89 L. Ed. 101; Hillsborough Tp. Somerset County, N. J. v. Cromwell, 1946, 326 U.S. 620, 623, 66 S.Ct. 445, 90 L.Ed. 358; Spector Motor Service v. O’Con-*203nor, 1951, 340 U.S. 602, 604, 71 S.Ct. 508, 95 L.Ed. 573; England v. Louisiana State Bd. of Medical Examiners, 1964, 375 U.S. 411, 423-424, 84 S.Ct. 461, 11 L.Ed.2d 440.

“9. ¶ 57.08, supra.

“10. Great Lakes & Dock Co. v. Huffman, n. 7, supra [(1943) 319 U.S. 293, 63 S.Ct. 1070, 87 L.Ed. 1407].”