Opinion
No. 35100.
December 7, 1942. Suggestion of Error Overruled January 18, 1943.
1. TAXATION.
Equity has jurisdiction to enjoin the collection of taxes and in such cases the bill must not only show that the tax collector is proceeding to sell distrained property unlawfully, but must also show a threatened irreparable injury (Code 1930, sec. 420; Const. 1890, sec. 159).
2. TAXATION.
The codal provision that the chancery court shall have jurisdiction of suit to restrain the collection of any taxes levied or attempted to be collected without authority of law does not dispense with the necessity for showing an independent equity when the taxes have been levied and are sought to be collected with authority of law (Code 1930, sec. 420).
3. LICENSES.
Where the State Tax Commission proposed an additional assessment under statute providing for privilege tax and a hearing was had on taxpayer's petition as provided by statute, commission acted with full authority and within its jurisdiction and where sheriff was proceeding to collect the additional tax under warrant of Tax Commissioner, taxpayer's remedy was to pay the tax and sue for recovery, and taxpayer was not entitled to injunction restraining collection of tax on ground that it was levied or attempted to be collected "without authority of law" under codal provision authorizing injunction in such cases (Code 1930, sec. 420; Laws 1934, ch. 119, secs. 2-e, 2-f; Laws 1936, ch. 154, sec. 57).
4. TAXATION.
Where Tax Commission is acting in a matter beyond its jurisdiction or in an unauthorized manner or the proceeding for the imposition and assessment of a tax is void, the commission acts "without authority of law" within codal provision authorizing injunction to restrain collection of taxes in such cases, but where a hearing is for correction of amount of tax assessed against the person improperly charged and required to pay tax, a mere "irregularity" is involved and injunction will not lie (Code 1930, sec. 420).
5. TAXATION.
Under codal provisions authorizing the issuance of injunction to restrain the collection of taxes levied or attempted to be collected "without authority of law" the quoted phrase imports more than mere irregularity or errors of computation, and the correction of improper charges involves matters remediable by appeal or original suit and presupposes jurisdiction (Code 1930, sec. 420).
6. TAXATION.
Where the damage is fixed by the amount of the tax demanded and recovery if proper is allowed in such amount with interest and costs, such damage is not "irreparable" so as to afford an independent ground in equity for issuance of an injunction to restrain collection of tax (Code 1930, sec. 420).
7. LICENSES.
Statute providing that circuit court of the county in which the taxpayer resides shall have original jurisdiction of any action to recover privilege tax improperly collected does not contemplate a mere appeal on the record as by certiorari but implies an original action in which the entire merits of the case may be heard and the liability of the taxpayer adjudged and computed in the light of his determined status (Laws 1934, ch. 119, sec. 10, as amended by Laws 1938, ch. 113, sec. 8).
8. LICENSES.
A statutory remedy of action to recover any privilege tax improperly collected was "clear, adequate and complete" and hence taxpayer was not entitled to enjoin collection of additional privilege tax assessed at hearing by State Tax Commission (Laws 1934, ch. 119, sec. 10, as amended by Laws 1938, ch. 113, sec. 8; Code 1930, sec. 420).
APPEAL from chancery court of Neshoba County, HON. T.P. GUYTON, Chancellor.
Greek L. Rice, Attorney General, by W.D. Conn, Jr., Assistant Attorney General, for appellant.
Throughout this whole proceeding the commissioner and the commission were following the law and were proceeding just exactly as the law directs them to proceed. The law itself (Sec. 10, Ch. 119, Laws of 1934, as amended by Sec. 8, Ch. 113, Laws of 1938) provides: "No injunction shall be awarded by any court or judge to restrain the collection of the taxes imposed by this act, or to restrain the enforcement of this act. The provisions of section 420, Code of 1930, shall not apply to taxes imposed by this act."
See Sec. 7, Ch. 119, Laws of 1934, as amended by Sec. 5, Ch. 113, Laws of 1938; Sec. 10, Ch. 119, Laws of 1934, as amended by Sec. 8, Ch. 113, Laws of 1938; Sec. 11, Ch. 119, Laws of 1934, as amended by Sec. 9, Ch. 113, Laws of 1938.
The only contention made by Kerr in his bill for injunction was that the commissioner and the commission had erroneously decided that he was liable for a higher rate of tax than he thought he was due to pay, and the only question presented by this appeal is to find out whether a taxpayer is to be allowed recourse to the chancery court via injunction every time he deems that the State Tax Commissioner or the State Tax Commission has acted erroneously either as to fact or to law in deciding his tax liability under the sales tax law. Under the law, a remedy was afforded Kerr by the law itself; that is, pay the tax and sue to recover, and jurisdiction for such purpose was vested in the circuit court of his home county.
The only jurisdiction of the chancery court to enjoin the collection of taxes is contained in what is currently Section 420 of the Mississippi Code of 1930. This jurisdiction, however, is not absolute, because this court has heretofore construed it to be subject to the general doctrine that an injunction will not lie unless the party is without a plain, adequate, and complete remedy at law.
Coulson v. Harris, 43 Miss. 728; McDonald v. Murphree, 45 Miss. 705; Anderson v. Ingersoll, 62 Miss. 73; Board of Supervisors of Noxubee County v. Ames (Miss.), 3 So. 37; Purvis v. Robinson, 110 Miss. 64, 69 So. 673; Madison County v. State Highway Commission, 191 Miss. 192, 198 So. 284; Reed v. Normon-Breaux Lumber Company, 149 Miss. 395, 115 So. 724; Western Union v. Kennedy, 110 Miss. 73, 69 So. 674; Henry v. Donovan, 148 Miss. 278, 114 So. 482; Bank v. Gildart, 64 F.2d 873; Stratton v. Railroad Co., 284 U.S. 531, 76 L.Ed. 465; Matthews v. Rogers, 284 U.S. 521, 76 L.Ed. 447.
There can be no question but that the State Tax Commission and its chairman possess the authority and jurisdiction to proceed against appellee in its claim for sales taxes. All jurisdictional and procedural steps have been taken. The bill of complaint merely states that the appellant was wrong in deciding that he was taxable under one provision of the law rather than under another. Under such circumstances, the chancery court had no jurisdiction to enjoin the execution of the judgment enrolled against appellee, but appellee should be required to pursue the remedy which was afforded him by the law itself. We take it that there is no question but that the remedy afforded by the statute constituted an adequate and complete remedy at law.
The State Tax Commission and the chairman thereof are charged by law with the duty of enforcing its provisions. Their exercise of this power was not without authority of law and, therefore, we think that Section 420 of the present Code can have no application to this case. It is only in those cases where taxes are levied or attempted to be collected without authority of law that the chancery court has power to restrain.
Purvis v. Robinson, supra; Western Union v. Kennedy, supra; Browning v. Matthews, 73 Miss. 343, 18 So. 658; Morgan v. Wood, 140 Miss. 137, 106 So. 435.
Compare City of Meridian v. Ragsdale, 67 Miss. 86, 6 So. 619; Ball v. City of Meridian, 67 Miss. 91, 6 So. 645.
W.E. Gore, of Jackson, and Richardson Sandford, of Philadelphia, for appellee.
The bill in this case was filed and a temporary injunction fiat issued on a hearing before the chancellor in vacation. Bond was given, as provided by Section 421 of the Code of 1930, and the chancery clerk of Neshoba County thereafter issued the writ, commanding the Chairman of the State Tax Commission and the sheriff of Neshoba County to refrain from further action to collect the taxes, in the bill referred to, on account of engaging in a business, the privilege of doing which is said to be taxable, under Section 2f(2) of what is commonly called the "Sales Tax Law of 1934," as amended.
The case was tried on an amended bill and a demurrer, in term time.
Our position is, (1) that mere illegality of collection or an attempt to collect will support the issuance of an injunction, and (2) that additional facts are present here, which call for the exercise of the jurisdiction.
The demurrer admits all of the facts set up in the bill, as well as the conclusions of law that necessarily follow from the facts.
The facts are: (1) That the chairman has undertaken to collect 2 per cent of the appellee's gross receipts. (2) That the appellee is a contractor. (3) That the rate of taxation is 1 percent of his gross receipts. (4) That the appellant has paid, at this rate, all he owes. (5) That no part of his gross receipts was derived from any sale of tangible property. (6) That the principal contractor has paid taxes at the rate of 1 percent on all taxable contracts from which the appellee, as a subcontractor, derived his gross receipts. (7) That the appellee has paid, at the rate of 1 percent, all he owes on all other contracts performed by him between October 1, 1939, and June 1, 1940, the aggregate amount of which exceeded $3,000 for the whole of the year 1939, and which also exceeded said sum the first five months of the year 1940. (8) That no single contract during the last seven months of 1940 exceeded $3000, and, therefore, no tax should have been calculated on the gross receipts from contracts performed during that time. (9) That the appellee paid all flat privilege taxes demanded of him as a contractor for each of said years.
The inevitable conclusions of law are these: (1) That the attempt to collect 2 per cent, when only 1 percent was due and it had been paid, is unlawful. (2) That, in addition to this, no tax can be computed or collected under Section 2-f, on the gross receipts from any of these transactions, since no sale of tangible property is involved. (3) The appellee cannot be required to pay taxes calculated on any gross receipts derived from contracts where he was a sub-contractor. (4) That the appellee has paid all the taxes he owed during the period from October 1 1939, to the end of 1940. (5) From these admitted facts and legal conclusions, it follows that the attempt of the chairman to collect taxes from the appellee was "without authority of law," and, therefore, clearly within the terms of Section 1831 of the Code of 1880, which vested jurisdiction in the chancery court to enjoin such attempts. That section of the Code of 1880, in 1890, became a part of the Constitution under both paragraphs (a) and (f) of Section 159 of that document and thereby the jurisdiction of chancery courts to enjoin such collections was placed beyond the reach of legislative power.
The legislature provided, (1) that no injunction shall issue against the collection of any taxes imposed by the act, and (2) that the provisions of Section 420 of the Code of 1930 shall not apply to taxes imposed by it.
No legislation was required, after 1890, to authorize chancery courts to enjoin such proceedings. The adoption of Section 420 of the Code of 1930, being no more than a legislative declaration of a constitutional power, in no way added anything to the jurisdiction or power of the chancery courts. If no such statute had been adopted after November 1, 1890, the effective date of the Constitution, the chancery courts would have been authorized to grant injunctions against such proceedings, on such terms as the court conceived to be equitable to both litigants, as it does in all other cases where no statute prescribes the terms. Security as to the payment of the taxes, damages and costs could be required, thereby safeguarding the interest of the state in the integrity of its revenues and their ultimate collection, if any taxes were due it.
Limiting the operation of Section 420 of the Code of 1930 or its outright repeal could not affect the rights of a taxpayer, which the Constitution confers on him, to have an injunction against such collection or attempts to collect and, in even doubtful cases, to have a judicial determination of his liability before his property is confiscated, however dire the necessity of the state may be or whatever may be the views of an administrative officer.
The question here presented is whether the chancery court may enjoin the collection of "sales" taxes levied or attempted to be collected without authority of law as provided in Section 1831 of the Code of 1880, and the corresponding section 420, of the Code of 1930, notwithstanding the provisions of Section 8, Chapter 113, Laws of 1938, commonly known as the Sales Tax Law, which provides that no injunction will lie to restrain the collection of taxes under it and that Section 420 shall not apply to such taxes.
The position of the appellee is that this provision is void, that the chancery court has constitutional jurisdiction to enjoin such collection, independent of any statute.
Freeman v. Guion, 11 Smedes M. 58; Servis v. Beatty, 32 Miss. 52; Bell v. City of West Point, 51 Miss. 262; Bank of Mississippi v. Duncan, 52 Miss. 740; Buie v. Pollock, 55 Miss. 309; McBride v. Adams, 70 Miss. 716, 12 So. 699; Dinwiddie v. Glass, 111 Miss. 449, 71 So. 745; Hoskins v. Ames, 78 Miss. 986, 29 So. 828; Scruggs v. Blair, 44 Miss. 406; Prentiss v. Turner, 170 Miss. 496, 155 So. 214; Houston v. Royston, 7 How. 543; State ex rel. Knox v. Speakes, 144 Miss. 125, 109 So. 129; Drummond v. State, 184 Miss. 738, 185 So. 207; Board of Supervisors of Jefferson County v. Arrighi, 54 Miss. 668; Board of Supervisors of Holmes County v. Black Creek Drainage District, 99 Miss. 739, 55 So. 963; Board of Supervisors of Quitman County v. Self, 156 Miss. 273, 125 So. 828; Board of Supervisors of Claiborne County v. Callender et al., 128 Miss. 159, 90 So. 722; Shaw v. Thompson, 1 Smedes M. 628; Mitchell v. Otey, 23 Miss. 236; City of Meridian v. George, 67 Miss. 86, 6 So. 619; Ball v. City of Meridian, 67 Miss. 91, 6 So. 645; Browning v. Matthews, 73 Miss. 343, 18 So. 658; Yazoo M.V.R. Co. v. Adams, 73 Miss. 648, 19 So. 91; Code of 1880, Sec. 1831; Code of 1930, Sec. 1835; Constitution of 1890, Sec. 159, pars. (a), (f); Griffith's Miss. Chancery Practice, Sec. 84; 4 Pomeroy's Equity (4 Ed.), Secs. 1779, 1780.
There are independent grounds for equity jurisdiction. Boiled down, the proceeding was void at every stage and the naked question, whether an injunction will lie where it is admitted that the man owed no tax. But, void as it is, the inevitable effect of the issuance of a warrant, delivery to the sheriff and enrollment by the circuit clerk casts clouds on his title and will fix a lien on all his property and render it subject to sale, to satisfy a debt to which, the chairman here admits, the state is not entitled. Moreover, garnishment will lie, so that it is impossible for any man to do any further business in the circumstances here shown. Relief by injunction is available in such a situation as this is.
The rule that equity will grant no relief where there is a remedy at law is subject to many limitations and these involve a determination of what is an adequate remedy.
The existence of a remedy at law does not deprive equity of jurisdiction unless such a remedy is clear, complete and as practical and efficient to the ends of justice and its prompt administration as the remedy in equity.
Simpson v. Ricketts, 185 Miss. 280, 186 So. 318, 320; Pitts v. Carothers, 152 Miss. 694, 120 So. 830; 30 C.J. Secundum 347, 348, 349.
An adequate remedy at law means a present remedy, one vested in the complainant to which he may at all times resort at his own option, fully and freely, without let or hindrance. A remedy cannot be adequate if its adequacy depends on the will of the opposing party, or if the party interested must appeal to the discretion of some other person or body.
Toledo Traction, Light Power Co. v. Smith, 205 F. 643; 30 C.J. Secundum, 347, 348, 349.
The remedy must exist against the same parties of whom the relief in equity is sought.
Barr v. Roderick, 11 F.2d 984.
We submit that the appellee here had no legal remedy at all. But, if partisanship overthrows our judgment, we think it may, with entire assurance, be said that it is a doubtful one, and the rule in such cases is that where the remedy at law is doubtful and equity can give relief, the taxpayer should not be compelled to speculate on the chance of obtaining relief at law.
State ex rel. Barron v. Cole, 81 Miss. 174, 32 So. 314; Colbert v. State, 86 Miss. 769, 39 So. 65; Simpson v. Ricketts, supra; Dantzler v. State Highway Commission, 187 Miss. 721, 193 So. 624; Pitts v. Carothers, supra; Griffith's Miss. Chancery Practice, Secs. 24, 436; 21 C.J. 50, Sec. 27.
Argued orally by W.D. Conn, Jr., for appellant, and by W.E. Gore, for appellee.
Appellee filed his bill for injunction against the Chairman of the State Tax Commission alleging that the latter was proceeding to enforce collection of the sum of $387 with interest and damages pursuant to Section 2-f of Chapter 119 of the Laws of 1934, as amended, which exacts a privilege tax equal to two percent of the gross income of his business. Appellee contends that he is liable at most for a tax equal to only one percent of the gross income of his business pursuant to the provisions of Section 2-e of the Act of 1934 and certain provisions of Section 57 of Chapter 154, Laws of 1936, as amended. No elaboration of the details of these provisions need be undertaken since it suffices for our present purposes to consider only that the disagreement between the parties involves the tax status of appellee as a fact issue.
Appellant's demurrer to the bill was overruled and defendant declining to plead further, the temporary injunction therefore granted was made permanent.
The taxpayer seeks to justify his right to injunction by Code 1930, Section 420, which is as follows: "The chancery court shall have jurisdiction of suits by one or more taxpayers in any county, city, town, or village, to restrain the collection of any taxes levied or attempted to be collected without authority of law." To this, the Tax Commissioner interposes Section 10 of Chapter 119, Laws 1934, as amended of Section 8, Chapter 113, Laws 1938, which, after setting forth the procedural machinery for the hearing by the Tax Commission of petitions to correct assessments, provides that "No injunction shall be awarded by any court or judge to restrain the collection of the taxes imposed by this act, or to restrain the enforcement of this act. The provisions of section 420, Code of 1930, shall not apply to taxes imposed by this act." The answer of the taxpayer is that the quoted paragraph is ineffective to nullify the jurisdiction granted by Section 420 for the reason that at the time the Constitution of 1890 was adopted there was in force Section 1831 of the Revised Code of 1880 which was the forerunner of Section 420, Code 1930, and that the jurisdiction thereby conferred had become immune to statutory impairment by Section 159 of the Constitution. This section is as follows: "The chancery court shall have full jurisdiction in the following matters and cases, viz.: . . . (f). All cases of which the said court had jurisdiction under the laws in force when this Constitution is put in operation."
It is not necessary for us to examine to what extent Section 420 is merely declaratory of an existing constitutional right nor whether the quoted prohibition against the use of injunction in the 1934 Act is effective. The uncertainty as to the jurisdiction of equity to enjoin the collection of taxes was early set at rest by Coulson v. Harris, 43 Miss. 728, where it was held that in such cases the bill must show not only that the tax collector was proceeding to sell distrained property unlawfully but there was also threatened an irreparable injury. The court stated: "And to give equity jurisdiction in tax cases, it must be averred in the bill, and shown by the facts set out therein, that a sale would be an irreparable injury to the complainant taxpayer. Courts of equity ought not, except upon the clearest grounds, to interfere with the speedy collection of public taxes. That a writ of injunction can only be issued, where the complainant, in his bill, makes a case of equity jurisdiction; and in all cases, involving simply the question of taxation; the issue is strictly one of common law, and courts of equity can take no cognizance thereof; that a party aggrieved by an illegal taxation, has ample remedy at law, and need not, in any case, have recourse to a court of equity, unless the facts bring the case within some appropriate recognized head of equity jurisdiction, such as to prevent irreparable injury, to protect a party in the enjoyment of an exclusive franchise or privilege, or to prevent a continuing trespass or injury, or other wrong, for which there would be no adequate remedy at law." This view was reaffirmed in McDonald v. Murphree, 45 Miss. 705. The court's concession that "Writs of injunction may be issued in cases of equity jurisdiction, and when specially authorized by statute," undoubtedly led to the enactment of Section 1831 of the Revised Code of 1880, Section 420, Code 1930, whereby statutory jurisdiction was conferred in cases where the taxes were levied or attempted to be collected "without authority of law." Even though we concede, for the purpose of discussion solely, that this section dispenses with the necessity for showing an independent equity, it certainly does not do so when the taxes have been levied and are sought to be collected with authority of law. We are led therefore to consider whether the taxes here involved were so imposed.
The record discloses that the commission proposed the additional assessment against the taxpayer, whereupon the latter filed his petition "for a hearing and a correction . . . of the tax so assessed" pursuant to the provisions of Section 10 of Chapter 119, Laws of 1934. The matter was duly and maturely heard by the commission upon the issue of the status of the petitioner, which issue was resolved against him. Thereupon, the further provisions of this section became applicable to the case, as follows: "Any person improperly charged with any tax and required to pay the same, may recover the amount paid, together with interest, in any proper action or suit against the commissioner, and the circuit court of the county in which the taxpayer resides or is located shall have original jurisdiction of any action to recover any tax improperly collected. It shall not be necessary for the taxpayer to protest against the payment of the tax or to make any demand to have the same refunded in order to maintain such suit. In any suit to recover taxes paid or to collect taxes the court shall adjudge costs to such extent and in such manner as may be deemed equitable. Either party to such suit shall have the right to appeal to the Supreme Court of Mississippi as now provided by law. In the event a final judgment is rendered in favor of the taxpayer in a suit to recover illegal taxes, then it shall be the duty of the state auditor, upon receipt of a certified copy of such final judgment, to issue a warrant directed to the state treasurer in favor of such taxpayer to pay such judgment, interest and costs. It shall be the duty of the state treasurer to honor such warrant and pay such judgment out of any funds in the state treasury." This procedure for relief was not availed of by the petitioner who took no course other than to enjoin the Chairman of the Tax Commission and the sheriff of the county who was proceeding to collect the additional tax by actual levy, under the warrant of the Tax Commissioner. The commission was acting with full authority in the matter. It was peculiarly within its jurisdiction and the procedure followed was that prescribed by the statute. No question is raised as to the adequacy of the hearing upon the taxpayer's petition. It is true that if the commission were acting in a matter beyond its jurisdiction (Browning v. Matthews, 73 Miss. 343, 18 So. 658; Hinton v. Board of Sup'rs of Perry County, 84 Miss. 536, 36 So. 565), or in an unauthorized manner (Morgan v. Wood, 140 Miss. 137, 106 So. 435), or if the proceedings for the imposition and assessment of the tax were void (City of Meridian v. Ragsdale, 67 Miss. 86, 6 So. 619; Ball v. City of Meridian, 67 Miss. 91, 6 So. 645), it would have acted "without authority of law." But where the hearing is for "a correction of the amount of the tax so assessed" and by a "person improperly charged" with the tax who is "required to pay the same," it involves at most a mere "irregularity" under Board of Supervisors v. Ames (Miss.), 3 So. 37. See also Coulson v. Harris, supra. In Western Union Telegraph Co. v. Kennedy, 110 Miss. 73, 69 So. 674, 675, there was involved the error in assessing by the Railroad Commission of a telegraph pole line to petitioner who was not in fact the owner thereof. This court said, "The bill of complaint merely states that the Railroad Commission was wrong in deciding that the pole line was the property of appellant and we are of the opinion that this decision cannot be reviewed by a bill in equity." See also Purvis v. Robinson, 110 Miss. 64, 69 So. 673; Reed v. Norman-Breaux Lumber Co., 149 Miss. 395, 115 So. 724; Anderson v. Ingersoll, 62 Miss. 73. We have already held that Section 420 affords the only authority for equity jurisdiction in cases of this class. Purvis v. Robinson, supra. The language of the statute "without authority of law" imports more than mere irregularity or errors of computation. The correction of improper charges involves matters remediable by appeal or original suit and presupposes jurisdiction. To hold otherwise would make jurisdiction dependent upon certitude of decision upon the merits. It is no anomaly that errors of fact or judgment may be committed while acting under authority of law.
We are moved forward therefore to the inquiry whether the taxpayer was entitled to injunction on the general equity ground that he had no adequate remedy at law. The other allegations of complainant's bill invoking other independent equities become mere conclusions of law in view of the record here presented. Where the damage is fixed by the amount of the tax demanded, and recovery if proper is allowed in such amount with interest and costs, such damage is not irreparable. Whitfield v. Rogers, 26 Miss. 84, 59 Am. Dec. 244; Pitts v. Carothers, 152 Miss. 694, 120 So. 830; Moss v. Jourdan, 129 Miss. 598, 92 So. 689; Joyce on Injunctions, Section 36; 28 Am. Jur., Injunctions, Sections 47, 48. The statute, Section 10, Chapter 119, Laws 1934, provides that the circuit court of the county in which the taxpayer resides shall have original jurisdiction of any action to recover any tax improperly collected, in which action he may recover the amount paid with interest and costs. Such provision does not contemplate mere appeal on the record as by certiorari but inescapably implies an original action in which the entire merits of the case may be heard and the liability of the taxpayer adjudged and computed in the light of his determined status. The remedy at law is therefore clear, adequate and complete. Cf. Henry v. Donovan, 148 Miss. 278, 114 So. 482; 28 Am. Jur., Injunctions, Section 40. The demurrer to the bill ought to have been sustained.
Reversed and bill dismissed.